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Investments · EPF · PPF · NPS

NPS Tier 1: 80CCD(1B) ₹50K Extra + Sec 124 (old 80CCD(2)) Employer

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  1. Facts

    NPS gives you TWO deductions unavailable from any other source: ₹50K extra over the Sec 123, Income-tax Act 2025 (old Sec 80C) limit via 80CCD(1B), and employer contribution deduction via Sec 124 (old Sec 80CCD(2)), available in BOTH old and new regime. Together they save ₹15,600 to ₹44,100 in annual tax with zero personal investment cost for the employer portion.

  2. Provisions and law

    • Sec 124 (old 80CCD(1))
    • Sec 80CCD(1B)
    • Sec 124 (old 80CCD(2))
    • Sec 202 (old 115BAC(2))

  3. Analysis

    The two NPS deductions, completely different: 80CCD(1B) = YOUR OWN contribution to NPS, extra ₹50K beyond 80C, old regime only. Sec 124 (old Sec 80CCD(2)) = EMPLOYER contribution to your NPS account, deducted from your taxable salary, both regimes. Most people confuse the two. You can have both if you are salaried. Sec 124 (old Sec 80CCD(2)), how to activate it: Step 1: Open NPS Tier 1 account (eNPS portal or employer HR). Step 2: Get PRAN number. Step 3: Email HR: "Please activate NPS employer contribution at 14% of my basic salary under Section 80CCD(2) and restructure my CTC accordingly." Step 4: HR restructures payslip, NPS employer line appears. Step 5: Form 130 (old Form 16) Part B shows Sec 124 (old Sec 80CCD(2)) deduction. Net effect: same CTC total, but ₹X thousand now goes to NPS instead of special allowance (which was fully taxable). Real numbers, basic salary ₹80,000/month: 14% NPS employer = ₹11,200/month = ₹1,34,400/year.

  4. Conclusion

    1. Check if you have NPS Tier 1 account, if not, open at eNPS portal (enps.nsdl.com)
    2. For 80CCD(1B): contribute ₹50,000 to NPS Tier 1 by March 31 each year
    3. For Sec 124 (old Sec 80CCD(2)): request employer HR to activate and restructure CTC (one-time email)
    4. Verify payslip: NPS employer contribution line should appear
    5. Verify Form 130 (old Form 16) Part B: Sec 124 (old Sec 80CCD(2)) deduction should be present
    6. New regime taxpayer: check if Sec 124 (old Sec 80CCD(2)) is reflected, most employers forget even in new regime

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