Under this section, an individual subscriber can claim a tax deduction on contributions made to their NPS Tier I account. The deduction is allowed up to 10% of salary (Basic + DA) for salaried employees, or 20% of gross total income for self-employed individuals.
This deduction falls within the overall ₹1.5 lakh limit of Section 80CCE, which includes deductions available under Sections 80C, 80CCC, and 80CCD(1) combined.
This is where NPS truly stands apart. Over and above the ₹1.5 lakh limit of Section 80CCE, NPS subscribers can claim an additional deduction of up to ₹50,000 under Section 80CCD(1B) for contributions to Tier I. This exclusive tax benefit is available only to NPS subscribers and is not applicable to any other savings instrument.
In effect, a subscriber in the highest tax bracket can save up to ₹15,600 in taxes annually through this provision alone.
For salaried employees enrolled under Corporate NPS, the employer's contribution to the employee's NPS Tier I account is also tax-deductible. The deduction is allowed up to 10% of salary (Basic + DA) for private sector employees, and up to 14% for central government employees. Importantly, this deduction is over and above the limits under Section 80CCE and 80CCD(1B), offering even greater tax savings.
| Section | Eligible Subscriber | Maximum Deduction |
|---|---|---|
| 80CCD(1) | Self / Salaried | Up to 10%/20% of income (within ₹1.5L cap) |
| 80CCD(1B) | All NPS Subscribers | Additional ₹50,000 |
| 80CCD(2) | Salaried (Corporate NPS) | Up to 10–14% of salary (no cap) |
NPS follows an Exempt-Exempt-Exempt (EEE) structure in part:
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