NPS Tax Benefit: 80CCD is Now Section 124
- Section 80CCD renumbered as Section 124 under the new Act. Same three sub-sections.
- Additional Rs 50,000 deduction under 80CCD(1B) continues. This is over and above the Rs 1.5 lakh 80C/Section 123 cap.
- Employer's NPS contribution (up to 10% of basic, or 14% for government) remains deductible under Section 80CCD(2).
- One of the few deductions available in the new regime: Section 80CCD(2) still works under the new tax regime.
If you contribute to the National Pension System (NPS) for tax savings, you need to know: Section 80CCD is now Section 124 under the Income Tax Act 2025. Your NPS tax benefits continue, and NPS remains one of the few deductions partially available even under the new tax regime.
Section 80CCD to Section 124: Complete Mapping
Employee Contribution - Section 124(1)
If you contribute to NPS from your own salary or income, you can claim a deduction under Section 124(1). This is capped at 10% of your salary (for salaried individuals) or 20% of gross total income (for self-employed individuals).
Important: this deduction falls within the overall Rs 1.5 lakh limit shared with Section 123 (old 80C). So if you have already exhausted Rs 1.5 lakh through PPF, ELSS, and LIC, your employee NPS contribution does not give you additional benefit under this sub-section.
Additional Rs 50,000 Deduction - Old 80CCD(1B)
This is the most popular NPS benefit. Under the old act, Section 80CCD(1B) allowed an extra Rs 50,000 deduction over and above the Rs 1.5 lakh limit. This continues under the new act within Section 124.
This means your total NPS-related deduction can be up to Rs 2 lakh - Rs 1.5 lakh under Section 123/124(1) combined, plus Rs 50,000 under the additional provision.
Employer Contribution - Section 124(2)
This is the key provision for salaried employees. If your employer contributes to your NPS account, that amount is deductible under Section 124(2), subject to a cap of 14% of salary (for central government employees) or 10% of salary (for others).
This is available under both old and new tax regimes. Employer NPS contribution is one of the few deductions that the new tax regime does not take away. If you are on the new regime, make sure your employer is contributing to NPS on your behalf.
Old Regime vs New Regime: What Survives
All three benefits available
Employee contribution within Rs 1.5L cap, additional Rs 50K under 124(1B), and employer contribution. Up to Rs 2L+ in total NPS-linked deductions.
Only employer contribution
Section 124(2) employer contribution still works. Your own contributions and the Rs 50K additional are NOT allowed. NPS is the rare exception that partially survives.
Employer NPS contribution under Section 124(2) is one of the very few deductions the new regime still allows. Up to 10% of basic (14% for government). It is also tax-efficient for the employer.
Frequently Asked Questions
What is the new section number for 80CCD?
Section 80CCD is now Section 124 under the Income Tax Act 2025. All sub-sections (employee, employer, and the additional Rs 50,000) are covered under Section 124.
Can I claim NPS deduction under the new tax regime?
Only the employer's NPS contribution (old 80CCD(2), now Section 124(2)) is available under the new tax regime. Your own NPS contribution and the additional Rs 50,000 deduction are not available under the new regime.
What is the maximum NPS deduction I can claim?
Under the old regime, you can claim up to Rs 2 lakh: Rs 1.5 lakh under the combined Section 123/124(1) limit, plus an additional Rs 50,000 under the extra NPS provision. Employer contribution under Section 124(2) is over and above this limit.
Is the Rs 50,000 additional NPS deduction still available?
Yes. The additional Rs 50,000 NPS deduction (old Section 80CCD(1B)) continues under the new act within Section 124. However, it is only available under the old tax regime, not the new regime.
For the broader 80C / Section 123 picture (PPF, ELSS, LIC, the Rs 1.5L ceiling NPS shares), see Section 80C now Section 123. For the regime trade-off that decides whether the NPS tax benefit even applies, see new regime vs old regime.
Disclaimer: This article provides general information about the Income Tax Act 2025 and is not tax advice. Consult a qualified Chartered Accountant for advice specific to your situation.
Need Help With NPS Tax Planning?
Get personalized advice on maximizing your NPS deductions under both the old and new tax regimes.