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ArticleSection 80CCD is where the NPS tax benefits live, and it has three distinct parts that confuse many people. Understanding them unlocks the only deduction that meaningfully survives in the new regime. Here's how 80CCD works.
Reviewed by CA Harika Chebolu, FCA · Last updated 2026-06-13
Quick answer
80CCD covers NPS in three parts — within 80C, an extra Rs 50,000, and the employer contribution that even works in the new regime. Here's how.
Your own NPS contribution is deductible under 80CCD(1), but it sits within the overall Rs 1,50,000 limit shared with 80C. So on its own it doesn't give you anything beyond the 80C ceiling — the extra room comes from the next part.
This is the valuable one for individuals: an additional deduction of up to Rs 50,000 for NPS, over and above the Rs 1,50,000 of 80C. It's one of the few ways to push your total deductions past Rs 1,50,000, and it's an old-regime benefit.
The employer's contribution to your NPS is deductible under 80CCD(2) — up to 10% of salary (14% for government employees) — and crucially, this part works even in the new regime. For salaried people, it's the single most useful deduction that survives the move to the new regime.
In the old regime, a salaried person can claim 80C up to Rs 1,50,000, then Rs 50,000 more under 80CCD(1B), then the employer contribution under 80CCD(2) on top — three layers of NPS-related benefit. In the new regime, only the 80CCD(2) employer layer applies.
The tax break comes with a lock-in: NPS is a retirement scheme with rules on withdrawal and a portion that buys an annuity at maturity. Use it for genuine retirement saving, not just the deduction, so the lock-in works in your favour.
80CCD(1B) is your own extra Rs 50,000 NPS deduction (old regime); 80CCD(2) is the employer's contribution , deductible up to 10% of salary (14% for government staff) and valid even in the new regime.
Up to Rs 50,000 under 80CCD(1B) over the Rs 1,50,000 of 80C, plus the employer contribution under 80CCD(2) — three layers in the old regime; only the employer layer in the new regime.
Only the employer contribution under 80CCD(2) — up to 10% of salary (14% for government employees). The 80C and 80CCD(1B) parts apply only in the old regime.
Want all three layers of NPS benefit set up? Write to the firm and we'll structure it with your employer.