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The three parts of NPS deduction
| Part | What it covers | Limit | Regime |
|---|---|---|---|
| 80CCD(1) | Your own contribution | 10% of salary (20% of gross income if self-employed), within ₹1.5 lakh with 80C | Old |
| 80CCD(1B) | Any further own contribution | ₹50,000 over and above ₹1.5 lakh | Old |
| 80CCD(2) | Employer's contribution | 14% of salary (basic + DA) in the new regime; 10% in the old regime for non-government employers | Both |
Why 80CCD(2) matters in the new regime
The new regime s.115BAC→s.202 removes almost every deduction, but the employer's NPS contribution survives. Restructuring part of your CTC as employer NPS can lower tax without moving to the old regime. Note the overall cap: employer contributions to NPS, EPF and superannuation together above ₹7.5 lakh a year are taxed as a perquisite.
Tier I vs Tier II
Only contributions to the Tier I (pension) account qualify. Tier II is a voluntary savings account without these deductions, except a specific locked-in variant for central government employees.
Worked example
Example: Aman's basic + DA is ₹8,00,000. His employer puts 14% (₹1,12,000) into NPS. In the new regime he deducts the full ₹1,12,000 under 80CCD(2) in addition to the ₹75,000 standard deduction. If he also pays ₹50,000 himself, that extra amount helps only in the old regime under 80CCD(1B).
Common mistakes
- Claiming 80CCD(1B) in the new regime
- Treating the employer's share as part of the ₹1.5 lakh 80C limit — it is separate
- Contributing to Tier II and expecting a deduction
Frequently asked questions
Only the employer's contribution under 80CCD(2) (section 124 of the 2025 Act). Your own contributions — 80CCD(1) and 80CCD(1B) — need the old regime.
Yes. 80CCD(1B) is available to any individual contributing to NPS Tier I, in the old regime.
Last reviewed on 11 November 2026 by Vinay Jaglan, VJ & Associates. Law and portal screens change — verify before acting, or ask the office.
