NPS Tax Benefits: Old vs. New Regime Explained

• NPS contributions offer tax deductions under Section 80CCD of the Income Tax Act, 1961, encouraging long-term financial planning.
• Section 80CCD(1) covers individual contributions (up to 10% of salary or 20% of G.T.I.), and 80CCD(1B) provides an additional Rs 50,000 deduction for NPS.
• Section 80CCD(2) allows deductions for employer contributions to NPS, limited to 10% of salary for private sector (old regime) and 14% for government employees (both regimes) or private sector (new regime).
• Under the Old Tax Regime, taxpayers can claim deductions from 80CCD(1) and 80CCD(1B) (max Rs 2 lakh for individual NPS) plus 80CCD(2).
• The New Tax Regime forgoes 80CCD(1) and 80CCD(1B) benefits but still allows deductions for employer contributions under 80CCD(2), with a higher limit for private sector employees.

Why It Matters: NPS tax benefits vary significantly between old and new tax regimes, especially for individual contributions.