Corporate NPS Scheme 2026: How Salaried Employees Save Extra Tax Under Section 80CCD(2)
Corporate NPS is an employer-employee adoption model of the National Pension System. By redirecting up to 10% of basic salary as employer NPS contribution under Section 80CCD(2), salaried employees can reduce their taxable gross income substantially without altering their total CTC!
1. What is Corporate NPS?
Under Corporate NPS, companies enroll their employees into the NPS framework. The employer deposits contribution directly into the employee Tier 1 account, which qualifies for tax deduction under Section 80CCD(2).
2. CTC Restructuring Example
For an employee with basic salary of ₹12,00,000 per year, reallocating 10% (₹1,20,000) into Section 80CCD(2) reduces net taxable income by ₹1,20,000, saving ₹37,440 in cash tax in the 30% slab!
3. Benefits Under New Tax Regime (Section 115BAC)
Section 80CCD(2) is one of the rare deductions fully retained under the New Tax Regime!
4. Employer Tax Deductions (Section 36(1)(iv))
Employers can claim their NPS contribution on behalf of employees as a business expense under Section 36(1)(iv) of the Income Tax Act.