Unlock Tax Savings: Maximize NPS Benefits Under the New Tax Regime

The National Pension System (NPS) offers a unique opportunity for taxpayers to save significantly under the New Tax Regime of 2025. By shifting to the Corporate or Employer Model, individuals can enjoy tax exemptions on employer contributions without any additional investment or paperwork. This benefit, covered under Section 80CCD(2) of the Income Tax Act, allows government employees to claim exemptions up to 14% of their basic salary, while private sector employees can claim up to 10%.

For instance, if an employee’s basic salary is ₹9.6 lakh annually and their employer contributes 14% to NPS, they can save ₹1.34 lakh in taxable income. This simple switch not only reduces the taxable salary but also ensures compliance with the New Tax Regime’s limited deduction framework. Unlike the Old Regime, which offers a ₹50,000 exemption under Section 80CCD(1B), the New Regime provides greater relief through employer contributions.

The process to transfer to the Employer Model is straightforward. Employees can log in to their CRA portal, select the “Sector Change” option, and update their account to the Corporate Sector using the EPS code provided by their HR department. The update is typically completed within 7–10 days.

This strategy is particularly advantageous for salaried individuals, as it requires no extra effort while delivering substantial tax savings. By leveraging this overlooked benefit, NPS subscribers can optimize their financial planning and make the most of the New Tax Regime.