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Employer NPS Tax Savings Calculator

Short answer

Your employer's NPS contribution is deductible under Section 124 (formerly 80CCD(2)) in both tax regimes, up to a limit. On the default inputs (Basic plus DA ₹60,000 a month and a 14% contribution) ₹1,00,800 a year is deductible, saving about ₹31,450 a year in the 30% slab with 4% cess.

Last checked · 2 key figures from the fact register

Key facts

Key facts on this page with their source and the date each was checked
FactValueSourceDate 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 sourceIncome 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 sourcesBusiness Today: tax rules for employer contribution beyond 7.5 lakh (opens in a new tab)

Your employer's NPS contribution is deductible under Section 124 of the Income-tax Act, 2025 (formerly 80CCD(2)), up to a limit, in both tax regimes. Enter your Basic plus DA, the contribution percentage, the limit that applies to you and your slab to see the yearly saving.

Estimated tax saved per year

₹31,450

Annual Basic + DA
₹7,20,000
Deductible contribution
₹1,00,800
Above the limit (not deductible)
₹0

How it is calculated

  • Annual Basic + DA = monthly × 12
  • Deductible = the lower of your employer's percentage and the limit, applied to annual Basic + DA
  • Tax saved = deductible × slab rate × 1.04 (4% cess)
  • Employer NPS, EPF and superannuation together are also subject to a ₹7.5 lakh yearly cap, which this calculator does not apply.

Estimates for information only; not financial, tax or legal advice.

Worked example

Example (the default inputs): Basic plus DA ₹60,000 a month is ₹7,20,000 a year. A 14% contribution is ₹1,00,800, all deductible. In the 30% slab with 4% cess, the saving is about ₹31,450 a year.

Frequently asked questions

What is the limit?

Up to 14% of salary for Central or State Government employers, and 10% for other employers in the old regime. 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.

Is the money lost?

No. It goes into your NPS account, but it is locked in for retirement under NPS rules.

What about the ₹7.5 lakh cap?

Employer contributions to NPS, EPF and superannuation together are also capped at ₹7.5 lakh a year; the excess is a taxable perquisite. This calculator does not apply it.

Related perks

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

    Income Tax Department: Section 124

  • 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

Government employee? Find your salary by pay level and see 8th Pay Commission scenarios.

Estimates for information only; not financial, tax or legal advice. Disclaimer.