NPS Tax Benefits Under 80CCD: How to Maximise Your Savings in 2025?
The National Pension System (NPS) is not just a powerful retirement planning tool but also an effective way to save on taxes under Section 80CCD. As financial year 2024–25 progresses, salaried individuals and self-employed taxpayers are actively seeking tax-saving avenues. NPS continues to be a high-value option—especially for those looking to plan long-term.
Here’s how you can unlock the full tax benefits of NPS under Section 80CCD in 2025.
🔹 Understanding Section 80CCD:
Section 80CCD is divided into two subsections:
Section 80CCD(1):
Deduction for employee/self-contribution to NPS.
Maximum deduction:
Salaried: Up to 10% of salary (Basic + DA)
Self-employed: Up to 20% of gross income
Capped at ₹1.5 lakh (combined with Sections 80C, 80CCC)
Section 80CCD(1B):
Additional deduction of ₹50,000
Over and above the ₹1.5 lakh limit
Exclusively for NPS contributions
Section 80CCD(2):
Deduction for employer’s contribution to employee’s NPS
Up to 10% of salary (Basic + DA)
No monetary ceiling under Section 80C
Available only to salaried employees
🔹 Maximising NPS Tax Benefits in 2025:
Invest Smartly Under 80CCD(1B)
Utilize the exclusive ₹50,000 limit to reduce taxable income.
Consider systematic monthly contributions to reach the threshold.
Leverage Employer Contribution
Ensure your employer contributes to NPS under 80CCD(2).
This amount is not counted in the ₹1.5 lakh limit.
Combine with Other Sections
Combine NPS with EPF, PPF, ELSS under 80C to optimise your tax planning.
New vs Old Tax Regime
NPS deductions are applicable only under the old tax regime.
If you opt for the new regime, these deductions won’t apply.
🔹 Example of Maximum Tax Deduction:
| Component | Deduction Amount |
|---|---|
| Section 80CCD(1) (within 80C) | ₹1,50,000 |
| Section 80CCD(1B) | ₹50,000 (additional) |
| Section 80CCD(2) | No limit (employer’s part) |
Total Tax Deduction Possible: ₹2,00,000+ (depending on employer contribution)
🔹 Benefits Beyond Tax Savings:
Retirement Corpus: Builds long-term wealth for post-retirement life.
Low Cost: NPS has one of the lowest fund management fees.
Diversification: Option to allocate funds to equity, government bonds, and corporate debt.
Regulated by PFRDA: Ensures transparency and safety.
✅ Frequently Asked Questions (FAQ)
1. What is Section 80CCD of the Income Tax Act?
Section 80CCD provides tax deductions for contributions made to the National Pension System (NPS) by individuals and employers. It includes three subsections: 80CCD(1), 80CCD(1B), and 80CCD(2), each with different deduction limits.
2. How much tax can I save under 80CCD in 2025?
You can claim up to ₹2,00,000 in total deductions:
₹1.5 lakh under Section 80CCD(1) (within the 80C limit)
₹50,000 under Section 80CCD(1B) (additional)
Employer contributions under 80CCD(2) are over and above these limits.
3. Can I claim both 80CCD(1B) and 80C deductions?
Yes. Section 80CCD(1B) offers an additional ₹50,000 deduction beyond the ₹1.5 lakh allowed under Section 80C.
4. Is the deduction under Section 80CCD available in the new tax regime?
No. Deductions under Section 80CCD are applicable only under the old tax regime.
5. Who is eligible to claim deduction under Section 80CCD(2)?
Only salaried employees whose employer contributes to NPS can claim a deduction under Section 80CCD(2). This is separate from the ₹1.5 lakh limit under 80C.
6. Can self-employed individuals avail of 80CCD(2) benefits?
No. Self-employed taxpayers can claim deductions only under Sections 80CCD(1) and 80CCD(1B), not under 80CCD(2).
7. What is the maximum limit under 80CCD(2)?
There is no fixed monetary ceiling. It is capped at 10% of the employee’s salary (Basic + DA) and is not included in the ₹1.5 lakh limit.
8. Is partial withdrawal from NPS taxable?
Partial withdrawals (up to 25% of self-contribution) are exempt from tax under specific conditions like marriage, illness, education, etc.
9. How do I invest in NPS to claim 80CCD benefits?
You can invest online through the NPS portal or via banks and financial institutions registered with PFRDA. Ensure contributions are made before the financial year ends to claim deductions.
10. Does Vizzve Finance offer NPS investment assistance?
Yes. Vizzve Finance provides personalised advisory services to help you choose the right NPS tier, allocate funds efficiently, and maximise tax benefits legally and strategically.
Published on: July 26, 2025
Published by: Selvi
www.vizzve.com || www.vizzveservices.com
Follow us on social media: Facebook || Linkedin || Instagram
🛡 Powered by Vizzve Financial
RBI-Registered Loan Partner | 10 Lakh+ Customers | ₹600 Cr+ Disbursed