Section 80CCD(1B)

What is Section 80CCD(1B)?

Section 80CCD has three parts. 80CCD(1) is the employee's NPS contribution, capped at 10% of salary (basic + DA), and it sits inside the ₹1.5 lakh 80C bucket. 80CCD(1B) is a separate ₹50,000 deduction for self-contribution to NPS Tier 1, available only if you have not already used the same amount under 80CCD(1). This is the most attractive piece because it effectively raises your tax-saving ceiling from ₹1.5L to ₹2L. 80CCD(2) is the employer's contribution to NPS, deductible up to 10% of basic + DA (14% for central government employees). Importantly, 80CCD(2) is the only NPS deduction that survives in the new tax regime. So even on the new regime, employer NPS contribution still reduces taxable salary.

Example

Anita invests ₹1,50,000 in PPF and ELSS (full 80C). She also puts ₹50,000 into NPS Tier 1. Under old regime: ₹1.5L (80C) + ₹50K (80CCD(1B)) = ₹2L deduction. At the 30% slab, that's ₹60,000 tax saved (plus cess).

How Section 80CCD(1B) is used

Many companies offer corporate NPS so employees and the employer both contribute. Payroll deducts the employee share, contributes the employer share, and reflects 80CCD(2) in the new regime TDS computation.

Section 80CCD(1B) FAQs

Can I claim 80CCD(1B) under the new tax regime?

No. The ₹50,000 self-contribution deduction works only under the old regime. Employer contribution under 80CCD(2) is still allowed in the new regime.

Is NPS Tier 2 covered?

No. Only NPS Tier 1 contributions qualify for tax deduction under 80CCD. Tier 2 is treated like a regular savings account.

How does corporate NPS save more tax?

Employer contribution up to 10% of basic + DA goes under 80CCD(2) and is deductible even on the new regime. So adding NPS in CTC reduces taxable salary without hitting any other cap.