How-to NPS Section 80CCD

How to claim NPS Section 80CCD deduction in ITR

From WebNotes, a public knowledge base. Last updated 19 May 2026. Reading time ~4 min.

Key facts

Section 80CCD(1)	Within Rs 1.5 lakh 80C cap; employee contribution to own NPS Tier 1
Section 80CCD(1B)	Additional Rs 50k cap, over and above 80C; self contribution to NPS Tier 1
Section 80CCD(2)	Employer contribution to NPS Tier 1; deductible up to 10% of salary (no cap)
Tax regime	80CCD(1) and 80CCD(1B): old regime only. 80CCD(2): both regimes

NPS Section 80CCD deduction is the largest single-deduction in Indian tax law for retirement savings. The three sub-sections (1), (1B), and (2) collectively provide up to Rs 2 lakh + 10% of salary in deductions (under old regime). Under the new regime, only employer contributions (80CCD(2)) are allowed.

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Step-by-step procedure

See the procedure infobox above.

Three sub-sections of Section 80CCD

Sub-section	Coverage	Deduction limit
80CCD(1)	Employee’s own contribution to NPS Tier 1	Within Rs 1.5L 80C cap
80CCD(1B)	Employee’s additional NPS Tier 1 contribution	Rs 50,000 (over and above 80C)
80CCD(2)	Employer’s contribution to NPS Tier 1	Up to 10% of salary (no rupee cap)

Worked example

Salaried investor, FY 2024-25:

Annual salary: Rs 12 lakh.
EPF (employee + employer): Rs 1.20 lakh combined.
Self ELSS investment: Rs 70,000.
NPS Tier 1 self contribution: Rs 50,000.
Employer NPS contribution to employee: Rs 1 lakh (~8.3% of salary).

Tax claims (old regime):

80C (EPF + ELSS): Rs 60k (employee EPF) + Rs 70k (ELSS) = Rs 1.3L; within Rs 1.5L cap.
80CCD(1): NPS within 80C if utilised; otherwise additional NPS goes to 80CCD(1B).
80CCD(1B): Rs 50k NPS contribution; additional deduction.
80CCD(2): Employer NPS Rs 1 lakh; fully deductible (10% of Rs 12L = Rs 1.2L cap).

Total deductions: Rs 1.5L + Rs 50k + Rs 1L = Rs 3 lakh.

Tax at 30% slab: Rs 90k saved.

New vs old regime impact

Under new regime (default FY 2023-24+):

80CCD(1): Not allowed.
80CCD(1B): Not allowed.
80CCD(2): Allowed.

For investors with significant NPS contributions, old regime preserves the deductions.

NPS Tier 1 vs Tier 2

Tier 1: Pension account; long-term; tax-deductible contributions; partial withdrawal at retirement.
Tier 2: Voluntary savings; no tax benefit on contributions; withdrawals flexible.

Section 80CCD applies only to Tier 1.

NPS account opening

NPS account opening procedure (not detailed here):

PRAN (Permanent Retirement Account Number) issued.
Via banks, AMCs (e.g., Zerodha, Coin), or NPS Trust directly.
Annual minimum contribution Rs 1,000 (Tier 1).

For MF investors interested in NPS: see how-to-invest-nps-coin (Zerodha-specific).

Form 26AS / employer Form 16

Employer’s NPS contribution appears in:

Form 16 (under deductions section).
26AS (TDS-related).

Verify alignment with your records.

External references

References

Income Tax Act, 1961, Section 80CCD(1), 80CCD(1B), 80CCD(2).
PFRDA (NPS) regulations.
CBDT clarifications on NPS deductions.

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WebNotes Editorial Team

The WebNotes Editorial Team covers Indian capital markets, payments infrastructure and retail investor procedures. Every article is fact-checked against primary sources, principally SEBI circulars and master directions, NPCI specifications and the official support documentation published by the intermediary in question. Drafts go through a second-pair-of-eyes review and a separate compliance read before publication, and revisions are tracked against the SEBI and NPCI rule changes referenced in the methodology section.

Last reviewed: 19 May 2026
Conflicts of interest: WebNotes is independent. No relationship with any broker, registrar or bank named in this article.