HRA and NPS: Two Tax Benefits Salaried Employees Miss
How HRA (House Rent Allowance) exemption and the employer NPS deduction can cut your tax bill, which regime each works in, and where to read the details.
4 min read · Published 25 September 2026 · Updated
Short answer
Two benefits quietly save salaried people money every year: the HRA (House Rent Allowance) exemption and the employer NPS (National Pension System) deduction. They work differently, and they behave differently under the two tax regimes.
HRA exemption
If you receive HRA as part of your salary and pay rent, part of that HRA is tax-free. The exemption is the least of three amounts: the actual HRA you receive, your rent minus 10% of salary, and 50% of salary in Mumbai, Kolkata, Delhi, Chennai, Hyderabad, Pune, Ahmedabad or Bengaluru, or 40% anywhere else (Rule 279). It is available only under the old tax regime.
Read the full method with worked examples in HRA exemption: how it is calculated and use the HRA calculator.
Employer NPS
When your employer contributes to your NPS account, that contribution can be deducted from your taxable income under Section 124 (formerly 80CCD(2)), within limits. Unlike HRA, it is available in both tax regimes, which makes it one of the most useful tax tools if you choose the new regime.
Read more in Employer NPS: old 80CCD(2), now Section 124.
Which regime should you choose?
| Tax regime | HRA exemption | Employer NPS |
|---|---|---|
| Old regime | Yes | Yes |
| New regime | No | Yes |
Choosing a regime means weighing all your deductions, not one. Compare both on your own numbers with the old vs new tax regime calculator, and read our guide to the old vs new regime for FY 2026-27.
How to claim
- At the start of the financial year, tell payroll your regime and declare your rent and landlord details.
- Ask HR whether employer NPS is available and how to route part of your CTC into it.
- Submit rent receipts and other proofs when payroll asks, often in December or January.
- If you miss the window, claim in your income tax return.
Common mistakes
- Claiming HRA after choosing the new regime.
- Not asking HR about employer NPS.
- Not keeping rent receipts and the landlord's PAN when rent is high.
Related perks and tools
Official sources
FAQ
Can I claim HRA in the new tax regime?
No. HRA exemption is available only under the old regime.
Is employer NPS deductible in the new regime?
Yes. The employer NPS deduction is allowed in both regimes.
Do I need to choose between HRA and NPS?
No. They are separate benefits. But HRA works only in the old regime, so your choice of regime affects whether you can use it.
How do I decide which regime to choose?
Compare your total tax under each regime with a calculator, using your real rent, investments and employer NPS figures.
Where do I claim them?
Through your employer's payroll declaration, and in your income tax return if you missed the employer's window.
Written by
PerkNavigate Editorial Team
Some figures come from reputable secondary sources and are marked in the post.
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