Has government provided NPS tax benefit on self-contribution in new tax regime?

National Pension System (NPS) subscribers seeking more tax benefits on contributions to NPS were left disappointed as Finance Minister Nirmala Sitharaman didn’t provide any additional tax benefit during her Budget 2026 speech today (Sunday, February 1, 2026).

In the new tax regime, NPS tax benefit is provided only on the employer’s contribution. There is no tax benefit on the employee contribution. Individuals who don’t do a job anywhere and self-contributes to NPS also can’t get any tax benefit in the new tax regime. There were also voices of making NPS an exempt-exempt-exempt (EEE) scheme, where contributions, returns and retirement corpus are tax-free.

However, Finance Minister Sitharaman didn’t provide any new NPS tax benefit in budget today.


Let’s go through NPS tax benefits the old and new tax regimes provide to NPS subscribers.

NPS tax benefits explained by Suresh Surana

NPS tax benefits in old tax regime-

• Individual contributions to the National Pension System (NPS) are eligible for tax deduction under Section 80CCD(1) of the Income Tax Act, 1961, subject to 10% of salary for salaried employees and 20% of gross total income for self-employed individuals and within the overall limit of Rs 1,50,000.
• In addition, an exclusive deduction of up to Rs 50,000 is available under Section 80CCD(1B) over and above the said limit of Rs 1,50,000. With effect from April 1, 2026, this additional deduction under Section 80CCD(1B) will also be available for contributions made by a parent or guardian to an NPS account of a minor, subject to the overall cap of Rs 50,000.
• Further, employer contributions to NPS are eligible for deduction under Section 80CCD(2), up to 14% of salary where the contribution is made by the central or a state government, and up to 10% of salary where the contribution is made by any other employer.

Old tax regime NPS tax benefits

Type of contribution	Relevant section	Tax deduction available	Maximum limit / conditions
Individual contribution (salaried)	Section 80CCD(1)	Yes	Up to 10% of salary, within overall limit of ₹1,50,000
Individual contribution (self-employed)	Section 80CCD(1)	Yes	Up to 20% of gross total income, within overall limit of ₹1,50,000
Additional individual contribution	Section 80CCD(1B)	Yes	Additional deduction up to ₹50,000 over and above ₹1,50,000
Contribution by parent/guardian to minor’s NPS (from 1 April 2026)	Section 80CCD(1B)	Yes	Up to ₹50,000 within the overall Section 80CCD(1B) cap
Employer contribution – Central/State government	Section 80CCD(2)	Yes	Up to 14% of salary
Employer contribution – Other employers	Section 80CCD(2)	Yes	Up to 10% of salary

NPS tax benefits in new tax regime

• Deductions for individual/self-contributions to NPS under Sections 80CCD(1) and 80CCD(1B) are not available.
• Employer contributions continue to be deductible under Section 80CCD(2).
• Following the Budget 2025 amendment, employer contributions to NPS are eligible for deduction up to 14% of salary for both government and non-government employees, ensuring uniform treatment across sectors and reinforcing the role of employer-supported retirement savings.

Type of contribution	Relevant section	Tax deduction available	Maximum limit / conditions
Individual/self contribution	Section 80CCD(1)	No	Not available under the new tax regime
Additional individual contribution	Section 80CCD(1B)	No	Not available under the new tax regime
Employer contribution (government and non-government)	Section 80CCD(2)	Yes	Up to 14% of salary for all employees