NPS deductions
Employer contributions to NPS, PF and superannuation together above ₹7.5 lakh a year are taxable as perquisites.
| Section | What | Limit | Regime |
|---|---|---|---|
| 80CCD(1) | Own contribution | Within ₹1.5 lakh 80C; up to 10% of salary (20% of income if self-employed) | Old |
| 80CCD(1B) | Own contribution | Additional ₹50,000 | Old |
| 80CCD(2) | Employer contribution | 14% of basic + DA (new); 10% (old) | Both |
Exit rules after the 2025 amendment
PFRDA's December 2025 amendment lets non-government subscribers withdraw up to 80% of the corpus as a lump sum at normal exit, with at least 20% used for an annuity (government subscribers keep the 60:40 split), and allows full withdrawal for small corpuses. Under the tax law, a lump sum of up to 60% of the corpus is exempt; check how any additional lump sum will be taxed before withdrawing. Annuity income is taxed at slab rates.
Worked example: old-regime taxpayer in the 30% slab
- 1Own NPS contribution of ₹50,000 under 80CCD(1B), over and above a full 80C.
- 2Tax saved = 30% × ₹50,000 = ₹15,000, plus 4% cess = ₹15,600.
- 3Employer contributes 10% of ₹12 lakh basic = ₹1,20,000 under 80CCD(2) — saves another ₹37,440 at 30% + cess.
Total NPS tax saving ≈ ₹53,040 a year.
