NPS Tax Benefits in New vs Old Regime: 80CCD Limits & 14% Employer Rule
New regime allows only employer NPS (80CCD(2) → Sec 125) up to 14% of Basic+DA — your own contributions get nothing. Old regime adds ₹1.5L (80C) + extra ₹50k (80CCD(1B)).
Deduction table: old vs new
| Contribution | Old regime | New regime |
|---|---|---|
| Your own (Tier-I) | Within ₹1.5L 80C | Nil |
| Your own — additional | ₹50,000 u/s 80CCD(1B) | Nil |
| Employer's (80CCD(2) → Sec 125) | 10% of Basic+DA (14% govt) | 14% of Basic+DA (all employees) |
The ₹7.5 lakh combined cap + withdrawal rules
- Employer NPS + PF + superannuation above ₹7.5L/year combined → excess taxable as perquisite in your hands.
- At retirement: 60% lump sum tax-free, 40% must buy an annuity — annuity pension is taxable as salary each year.
- Tier-II account: flexible, but no deduction in either regime.
- Not in your CTC? Ask HR to restructure salary with an employer-NPS component — it beats allowance shuffling for high earners.
By TaxSetu Editorial Team · Last reviewed: 7 October 2026
Based on the Income-tax Act 2025, Income Tax Rules 2026 and CBDT notifications; sections per the Income-tax Act 1961 (as amended) with 2025-Act mappings where notified · Verify on the official portal: incometax.gov.in
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Frequently Asked Questions
Only the employer's contribution — up to 14% of Basic+DA under Section 125 (old 80CCD(2)). Your own NPS contributions get no deduction in the new regime.
An extra deduction for your own Tier-I NPS contributions over the ₹1.5L 80C limit — available only in the old regime, not the new one.
Employer NPS + PF + superannuation contributions above ₹7.5L/year combined are taxed as perquisite in your hands — the excess loses its exemption.
The 60% lump sum is tax-free; 40% must buy an annuity whose pension is taxable as salary each year.