NPS for Salaried Employees: How to Maximise Tax Savings in 2026

Salaried employees can save up to ₹62,400 extra tax per year using NPS employer contribution. Here is the step-by-step strategy.

1.The employer contribution advantage under 80CCD(2)

If your employer contributes to NPS (up to 14% of basic+DA for government, 10% for private sector), this amount is deductible under 80CCD(2) — **over and above the ₹1.5 lakh 80C limit and the ₹50,000 80CCD(1B) limit**. This works even in the new tax regime. Example: Basic salary ₹6 lakh/year, employer NPS contribution 10% = ₹60,000 — this ₹60,000 is tax-free income, saving you ₹18,000 in tax at the 30% bracket.

2.How to request employer NPS contribution

Many companies allow you to restructure CTC to include employer NPS contribution. Ask your HR to redirect a portion of your special allowance or flexible benefit plan into NPS employer contribution. This doesn't increase your CTC — it restructures it for tax efficiency. On a ₹15 lakh CTC with ₹6 lakh basic, you could redirect ₹60,000/year, saving ₹18,720 in tax annually.

3.Complete NPS tax saving stack for old regime

Section 80CCD(1): ₹1.5 lakh (part of overall 80C limit). Section 80CCD(1B): ₹50,000 (additional, NPS-specific). Section 80CCD(2): employer contribution up to 10-14% of basic (unlimited, above 80C). For a ₹20 lakh CTC employee in the old regime: potential NPS-related tax savings = **₹62,400/year** (at 30% slab). Over 30 years, this is ₹18.7 lakh saved in tax alone.

4.Key takeaway

The 80CCD(2) employer contribution is the most underutilised tax benefit for salaried Indians. It works in both old and new regimes. Speak to your HR department about restructuring your CTC to include NPS employer contribution. Use our NPS calculator to see how these additional contributions compound over your career.