Section 80CCD gives tax deductions for NPS Tier-1 contributions in three parts. 80CCD(1) — your own contribution, within the ₹1.5L 80C ceiling. 80CCD(1B) — an extra ₹50,000 over and above 80C. 80CCD(2) — your employer's NPS contribution, now up to 14% of basic+DA after Budget 2025. In the new (default) regime only 80CCD(2) survives; 80CCD(1) and (1B) work only in the old regime.
80CCD(1) vs 80CCD(1B) vs 80CCD(2)
The three NPS sub-sections, who contributes, the FY 2025-26 limit and whether each survives in the new (default) regime.
| Sub-section | Who contributes | Limit (FY 2025-26) | Within 80C 1.5L? | New regime? |
|---|---|---|---|---|
| 80CCD(1) | Employee / self-employed | 10% of salary (20% of gross for self-employed) | Yes | No |
| 80CCD(1B) | Employee / self-employed | ₹50,000 extra | No · over & above | No |
| 80CCD(2) | Employer | 14% of basic+DA (no ₹ cap) | No · separate | Yes |
80CCD(1) + 80CCE cap: total 80C + 80CCC + 80CCD(1) cannot exceed ₹1.5 lakh. 80CCD(1B) sits outside that ceiling. Deduction only for NPS Tier-1; Tier-2 gets no 80CCD benefit.
80CCD(1) is not a fresh ₹1.5 lakh — it shares the single ₹1.5L ceiling (Section 80CCE) with 80C and 80CCC. Only 80CCD(1B) adds a genuine extra ₹50,000. So the maximum you can claim on your own NPS money is ₹2 lakh (₹1.5L via 80CCD(1)/80C + ₹50k via 80CCD(1B)) — and only in the old regime.
80CCD(1B) — the extra ₹50,000 for NPS
Section 80CCD(1B) lets you deduct up to ₹50,000 for a contribution to your NPS Tier-1 account, over and above the ₹1.5 lakh 80C limit. It is the single most popular reason people open an NPS account — but it works only in the old tax regime.
Old regime — 80CCD(1B) available
- Extra ₹50,000 deduction on NPS Tier-1
- Stacks on top of the ₹1.5L 80C limit
- Total self-NPS deduction up to ₹2 lakh
- Plus employer NPS under 80CCD(2)
- Best for those already using the full 80C
New (default) regime — not available
- 80CCD(1) and 80CCD(1B) both switched off
- No deduction for your own NPS money
- Only employer NPS 80CCD(2) is allowed
- Lower slab rates & ₹75k standard deduction instead
- 87A rebate makes income up to ₹12L tax-free
If you are on the new regime for the lower slabs, your personal NPS contribution buys no deduction — only what your employer puts in counts. Run both regimes on our income-tax calculator before deciding.
Not sure if 80CCD(1B) is worth switching to the old regime? Get it modelled on your numbers.
Talk to a Tax Expert →80CCD(2) — employer NPS, now 14%
Section 80CCD(2) is the deduction for what your employer contributes to your NPS account. It is separate from the ₹1.5L/₹50k limits and — crucially — it is the only NPS deduction that survives in the new tax regime.
- Budget 2025 raised the cap to 14% of basic + DA for all employees (private-sector employees on the new regime were earlier limited to 10%).
- Central/State Government employees have always had the 14% ceiling.
- There is no rupee cap — it is a percentage of your salary, so higher earners get a larger deduction.
- It applies whether you are on the old or new regime, making it the most tax-efficient NPS route in the new regime.
Many salaried employees on the new regime miss 80CCD(2) simply because their employer does not offer a corporate-NPS structure. If your CTC can be restructured so the employer routes up to 14% of basic+DA into NPS, that amount becomes fully deductible even in the new regime — a rare, still-live tax saving.
Want your salary structured to maximise the 80CCD(2) benefit?
Get Salary-Structuring Advice →How much tax can NPS save? (30% bracket, old regime)
Assume a ₹15 lakh salary, 30% slab, old regime, with the full 80C already used by EPF/insurance:
80CCD(1B) Extra self-NPS
80CCD(2) Employer NPS
Combined, the two NPS routes here save roughly ₹55,000 in tax — and the 80CCD(2) portion works in the new regime too. Figures are illustrative; your actual saving depends on your slab, salary structure and regime.
Eligibility and how to claim
- Contribute to an NPS Tier-1 account (not Tier-2)
- Be on the old regime for 80CCD(1)/(1B)
- Keep the NPS transaction statement / Form 24Q proof
- Employer NPS shown in Part B of Form 16 for 80CCD(2)
- Report deductions in Schedule VI-A of the ITR
- File the return before the due date to lock the deduction
Let TaxClue file your ITR and claim every NPS deduction correctly.
File My ITR with NPS →- Act & deductions: incometax.gov.in
- Section 80CCD, Income-tax Act 1961 (renumbered s.124, Income-tax Act 2025 — AY 2026-27)
- 80CCD(2) 14% for all employees (new regime): Finance Act 2025
- NPS: npscra.nsdl.co.in (PFRDA)
Disclaimer: This guide is general information based on the law and notifications in force when it was last updated. It is not professional advice for your case — rates, thresholds and due dates change, so check the current position or speak to our CA team before you act on it.