Employer NPS Contribution Tax Benefit (Section 124, formerly 80CCD(2))
Short answer
Last checked · 2 key figures from the fact register
Key facts
| Fact | Value | Source | Date checked |
|---|---|---|---|
| Employer NPS deduction (80CCD(2), now s.124) | Up to 14% of salary (Central or State Government employer, or new regime), 10% for others; own NPS ₹50,000 Official source | Income Tax Department: Section 124 (opens in a new tab) | |
| Cap on employer EPF, NPS and superannuation | ₹7.5 lakh a year; the excess is taxable Reported by reputable sources | Business Today: tax rules for employer contribution beyond 7.5 lakh (opens in a new tab) |
What it is
Your employer's contribution to your NPS (National Pension System) account is deductible from your taxable income. It is Section 124 of the Income-tax Act, 2025 (formerly Section 80CCD(2)), which has been in force since 1 April 2026.
Who gets it
Salaried employees whose employer contributes to NPS.
How much
Up to 14% of salary for Central or State Government employers and 10% for others. When you are taxed under the new regime, the limit is 14% for all employers. Salary means basic plus DA if the terms of employment say so. Employer contributions to EPF, NPS and superannuation together are also capped at ₹7.5 lakh a year.
This page is under editorial review. Some figures have not yet been confirmed against official sources. Check the official source before you act.
Eligibility
- Your employer offers NPS contributions
- You have a PRAN (Permanent Retirement Account Number)
Value
The tax you save depends on your slab. Use the employer NPS savings calculator.
How to claim
- Ask HR to route part of your CTC to employer NPS.
- Open a PRAN if you don't have one.
- Check that Form 130 (formerly Form 16) shows the deduction.
Documents checklist
- PRAN
- Salary structure
- Form 130 (formerly Form 16)
Deadlines
Structure your CTC at the start of the financial year.
Common mistakes
- Confusing it with your own contribution under Section 124(3)
- Exceeding the percentage cap
- Ignoring the ₹7.5 lakh combined cap
FAQ
Is it available in the new regime?
Yes. The employer NPS deduction is allowed in the new regime, at up to 14% for all employers.
Which section applies now?
Section 124 of the Income-tax Act, 2025. Payroll may still say 80CCD(2) until it updates.
Official sources
- Section 124, Income-tax Act, 2025 (Income Tax Department) (opens in a new tab)
- NPS Trust (opens in a new tab)
Written by the PerkNavigate editorial team from the sources above; not yet checked against official sources. See how we verify perks. Information only; not financial, tax or legal advice (disclaimer). Found an error? Tell us.
Sources and status
Each figure on this page comes from the fact register. What the badges mean.
- Official sourcechecked 2026-10-16
Section 124 (formerly 80CCD). Employer NPS: up to 14% of salary for Central or State Government employers, 10% for others, and 14% for all employers when the employee is taxed under s.202(1) (new regime). Own contribution (old 80CCD(1B)) 50,000 under s.124(3). Salary means basic plus DA if the terms of employment say so
- Reported by reputable sourceschecked 2026-10-16
7.5 lakh a year aggregate cap on employer contributions to EPF, NPS and superannuation; the excess is a taxable perquisite
Business Today: tax rules for employer contribution beyond 7.5 lakh
Pay levels and roles
Salary scenarios for the 8th Pay Commission, by level and by role. Every figure is a scenario, not an official number.
By pay level
Related perks
HRA (House Rent Allowance) Tax Exemption
Reduce your taxable income if you pay rent and HRA is part of your salary.