Is 80CCD(2) over and above other limits?

Yes. Employer NPS under 80CCD(2) is separate from the ₹1.5 lakh 80C limit and from the ₹50,000 80CCD(1B). But employer EPF + NPS + superannuation that is exempt is capped at ₹7,50,000 a year combined.

What is the difference between 80CCD(1B) and 80CCD(2)?

80CCD(1B) is your own NPS contribution (extra ₹50,000, old regime). 80CCD(2) is your employer’s NPS contribution (up to 14% of basic in the new regime, 10% old) and is the more powerful lever.

Is employer NPS worth it?

It is real retirement money that reduces your taxable income now. The trade-off is that NPS is locked till age 60 (at least 20% must buy an annuity at exit). Use it for money you can lock away.

Can I use employer NPS in the new regime?

Yes. 80CCD(2) is one of the few deductions still allowed in the new regime, which makes it the key lever for cutting tax there.

Employer NPS: Section 80CCD(2) (FY 2026-27)

Updated for FY 2026-27 · illustrative, not financial advice

Short answer: your employer’s NPS contribution under Section 80CCD(2)is tax-free up to 14% of basic salary in the new regime (10% in the old regime). It is separate from 80C and 80CCD(1B), which makes it the single most powerful lever for cutting tax in the new regime. Try it in the planner.

How much is tax-free

	New regime	Old regime
Employer NPS 80CCD(2)	Up to 14% of basic	Up to 10% of basic

“Basic” means basic salary (plus DA where applicable). The amount is contributed by your employer, so it does not come out of your take-home the way your own EPF does.

The ₹7.5 lakh combined cap

Employer contributions that are exempt (EPF + NPS + superannuation) are capped at ₹7,50,000 a year combined. Anything above that is taxed as a perquisite. For most salaries the 14%-of-basic NPS limit is reached well before this cap.

80CCD(2) vs 80CCD(1B)

80CCD(2): your employer’s NPS. Up to 14% of basic (new) / 10% (old). Works in both regimes.
80CCD(1B): your own extra NPS, up to ₹50,000. Old regime only.

How to use it to cut tax

In the new regime, ask payroll to route part of your CTC into employer NPS (80CCD(2)). Combined with employer EPF and meal coupons, this is how you push taxable income down to ₹12,00,000 forzero tax. The catch: NPS is locked till 60 (at least 20% must buy an annuity at exit), so use it for money you’re happy to lock away. Theplanner’s optimiser shows exactly how much NPS to set.

Frequently asked questions

How much employer NPS is tax-free?: The employer’s NPS contribution under Section 80CCD(2) is tax-free up to 14% of basic salary in the new regime, and up to 10% of basic in the old regime, for FY 2026-27.
Is 80CCD(2) over and above other limits?: Yes. Employer NPS under 80CCD(2) is separate from the ₹1.5 lakh 80C limit and from the ₹50,000 80CCD(1B). But employer EPF + NPS + superannuation that is exempt is capped at ₹7,50,000 a year combined.
What is the difference between 80CCD(1B) and 80CCD(2)?: 80CCD(1B) is your own NPS contribution (extra ₹50,000, old regime). 80CCD(2) is your employer’s NPS contribution (up to 14% of basic in the new regime, 10% old) and is the more powerful lever.
Is employer NPS worth it?: It is real retirement money that reduces your taxable income now. The trade-off is that NPS is locked till age 60 (at least 20% must buy an annuity at exit). Use it for money you can lock away.
Can I use employer NPS in the new regime?: Yes. 80CCD(2) is one of the few deductions still allowed in the new regime, which makes it the key lever for cutting tax there.