+ ₹7.5 lakh cap check
NPS Employer Contribution Calculator: Tax Saving Under Section 124 (80CCD(2)): This free NPS employer contribution calculator works out:
- your employer's NPS contribution a month and a year;
- the tax-free limit: 14% of Basic + DA in the new regime, 10% in the old regime for private employers;
- the tax you save;
- whether employer PF + NPS + superannuation crosses the ₹7.5 lakh limit.
It also projects your NPS corpus at retirement and the split under the new NPS exit rules: up to 80% lump sum and at least 20% annuity.
NPS Employer Contribution Formula
Example (calculator default): gross ₹1,00,000 a month, Basic + DA ₹40,000, employer NPS 10%, new tax regime, 30% slab.
| Item | Working | Amount |
|---|---|---|
| Employer NPS a year | 40,000 × 10% × 12 | ₹48,000 |
| Tax-free limit (14%) | 40,000 × 12 × 14% | ₹67,200 |
| Deductible | Lower of the two | ₹48,000 |
| Tax saved | 48,000 × 30% × 1.04 | ₹14,976 |
| Employer PF a year | 12% of ₹25,000 × 12 | ₹36,000 |
| PF + NPS against ₹7.5 lakh | 36,000 + 48,000 | ₹84,000 (within limit) |
NPS Employer Contribution Tax Limits (Tax Year 2026-27)
| Employer | New tax regime | Old tax regime |
|---|---|---|
| Private sector and PSU | 14% of Basic + DA | 10% of Basic + DA |
| Central and State Government | 14% of Basic + DA | 14% of Basic + DA |
From 1 April 2026 this deduction is in Section 124 of the Income-tax Act, 2025, which replaced Section 80CCD(2) with the same limits. It is one of the few deductions allowed in the new regime. There is no rupee cap, but the total employer contribution to PF, NPS and superannuation above ₹7.5 lakh a year is taxed as a perquisite, along with the returns on that excess.
Employer NPS vs Your Own NPS Contribution
| Contribution | Tax benefit | Regime |
|---|---|---|
| Employer's contribution (corporate NPS) | Up to 14% (or 10%) of Basic + DA | New and old |
| Your own contribution | Within the ₹1.5 lakh limit (up to 10% of salary) | Old regime only |
| Your own extra contribution | Additional ₹50,000 | Old regime only |
In the new regime, only the employer's contribution saves tax. That is why many employees ask HR to move part of their CTC into employer NPS.
Should You Take Employer NPS in Your CTC?
Moving part of CTC into employer NPS lowers taxable salary, so you save tax at your slab rate, but your monthly take-home falls by the same amount before tax. The money is locked in NPS until 60 (with limited partial withdrawals), and at exit at least 20% must buy an annuity. Weigh the tax saving against liquidity. In the example, ₹48,000 a year in NPS saves ₹14,976 of tax for someone in the 30% slab.
New NPS Exit Rules: 80% Lump Sum, 20% Annuity
PFRDA amended the NPS exit and withdrawal regulations in December 2025. For non-government subscribers on normal exit (age 60, superannuation or after 15 years):
| Corpus at exit | Options |
|---|---|
| Up to ₹8 lakh | 100% lump sum allowed |
| ₹8 lakh to ₹12 lakh | Up to ₹6 lakh lump sum with the rest as systematic withdrawal or annuity, or up to 80% lump sum with at least 20% annuity |
| Above ₹12 lakh | Up to 80% lump sum, at least 20% annuity |
Government subscribers continue with 60% lump sum and 40% annuity. Tax: 60% of the corpus withdrawn at exit is tax-free; the tax law has not been changed to cover the extra 20%, so that part is taxable at your slab rate. Annuity pension is taxable as income each year.
About the Retirement Projection
The projection compounds the employer's monthly contribution at your expected return, raises it each year by your salary increase, and splits the corpus by the exit rules above. NPS returns depend on markets and your fund choice, and annuity rates change, so treat the result as an estimate, not a promise. The default (9% return, 5% salary increase, 6% annuity rate) is only an example; change it to your own assumptions.
How to Use This NPS Employer Contribution Calculator
- Choose the tax regime and whether your employer is private or government.
- Open Salary and NPS: enter gross, Basic + DA, the employer NPS % from your CTC, and your tax slab.
- Open Other employer contributions: choose how employer PF is paid and add any superannuation.
- Open Retirement projection: enter your age, retirement age and assumptions.
- Read the tax-free amount, tax saved, ₹7.5 lakh check and projected corpus. Use Copy to share it.
For PF, see the PF calculator; for your full tax, see the TDS on salary calculator.
Frequently Asked Questions
How much employer NPS contribution is tax-free?
Up to 14% of Basic + DA in the new regime. In the old regime the limit is 10% for private employers and 14% for government employers.
Is employer NPS contribution allowed in the new tax regime?
Yes. The employer's NPS contribution is deductible up to 14% of Basic + DA in the new regime, under Section 124 of the Income-tax Act, 2025 (earlier 80CCD(2)).
What is the ₹7.5 lakh limit on employer contributions?
If the employer's total contributions to PF, NPS and superannuation exceed ₹7.5 lakh in a year, the excess and the returns on it are taxed as a perquisite.
How is employer NPS calculated?
Basic + DA × the employer's contribution %. 10% on ₹40,000 Basic + DA is ₹4,000 a month, ₹48,000 a year.
How much tax do I save with employer NPS?
Deductible amount × your slab rate × 1.04 for cess. ₹48,000 in the 30% slab saves ₹14,976.
Can I claim my own NPS contribution in the new regime?
No. Your own contribution, including the extra ₹50,000, is deductible only in the old regime. In the new regime only the employer's contribution is deductible.
How much NPS can I withdraw at 60?
Under PFRDA's December 2025 rules, non-government subscribers can take up to 80% as a lump sum and must use at least 20% for an annuity; a corpus up to ₹8 lakh can be withdrawn fully.
Is the NPS lump sum tax-free?
60% of the corpus withdrawn at exit is tax-free. The tax law has not been changed for the extra 20% now allowed, so that part is taxable, and annuity pension is taxable each year.
Does employer NPS reduce my take-home salary?
If it is carved out of your CTC, yes: monthly pay falls by the contribution, but you save tax on it and build a retirement corpus.
Is employer NPS part of salary for PF or gratuity?
No. PF and gratuity are worked out on wages (Basic + DA, at least 50% of pay); the employer's NPS contribution is a separate retirement benefit.