Every rupee of eligible deduction reduces the income on which you pay tax. Section 80CCD(2) of the Income-tax Act, 1961 is one such provision, and using it correctly can meaningfully lower your tax bill.

This guide explains Section 80CCD(2) in plain language — the deduction limit, who can claim it, what is covered, the documents to keep, and the exact steps to claim it in your ITR.

What is 80CCD(2)?

Section 80CCD(2) allows a deduction for your employer's contribution to your NPS account. Uniquely, this deduction is available under both the old and the new tax regimes.

How much can you claim?

Up to 10% of salary (basic + DA) for private employees, and up to 14% for central government employees; the new regime also allows 14% for eligible salaried taxpayers.

Who is eligible

  • Salaried employees whose employer contributes to NPS.
  • Available under both regimes — a key planning tool for new-regime taxpayers.

What is covered

  • Employer contribution to your NPS Tier-I account.

Documents and proof to keep

  • Salary slip / Form 16 reflecting the employer NPS contribution.

Retain these documents even though they are not attached to the return — the tax department can ask for them during processing or assessment.

New-regime planning

On a basic salary of ₹10,00,000, a 10% employer NPS contribution of ₹1,00,000 is deductible under 80CCD(2) even if you file under the new regime.

Points to remember

  • This is separate from your own 80CCD(1)/(1B) contributions.

How to claim it in your ITR

  1. Gather proof. Collect the certificates, receipts or statements listed above for the financial year.
  2. Choose the right regime. The deduction applies under both regimes, so pick whichever regime gives you a lower overall tax.
  3. Enter the amount. Report the eligible amount against Section 80CCD(2) in the deductions schedule of your ITR on the income-tax e-filing portal.
  4. Verify and file. Cross-check against Form 26AS / AIS, then submit and e-verify the return within the prescribed time.

Frequently asked questions

Is 80CCD(2) available under the new regime?

Yes. It is one of the few deductions retained under the new tax regime.