If you’re already maxing out your ₹1.5 lakh limit under Section 80C and still looking for legitimate ways to reduce your income tax, Section 80CCD(1B) can be your next best friend. This section allows an additional deduction of ₹50,000 for contributions to the National Pension System (NPS)—making it one of the most effective tools for maximizing tax savings.
Now, with the Income Tax Department’s calculator to compare tax savings under the new tax regime, understanding which deductions benefit you most has never been easier.
What is Section 80CCD(1B)?
Section 80CCD(1B) was introduced in 2015 to encourage retirement savings through the National Pension System (NPS). Under this section:
- You can claim an additional ₹50,000 deduction for your NPS contributions
- This is over and above the ₹1.5 lakh allowed under Section 80C
- Contributions made by the individual (not the employer) are eligible
- The benefit is available to both salaried and self-employed individuals
Who Can Claim Section 80CCD(1B)?
| Criteria | Eligibility |
| Salaried Employees | Can invest in NPS and claim ₹50,000 under 80CCD(1B) in addition to ₹1.5L under 80C |
| Self-Employed | Also eligible for the same deductions under 80CCD(1B) |
| NRIs | Eligible for NPS and tax deduction under 80CCD(1B) |
| HUFs & Corporates | Not eligible for this deduction |
Tax Limits: Salaried vs. Self-Employed
| Category | Under 80C | Under 80CCD(1B) | Total Deduction |
| Salaried | ₹1,50,000 | ₹50,000 | ₹2,00,000 |
| Self-Employed | ₹1,50,000 | ₹50,000 | ₹2,00,000 |
Note: Employer contribution to NPS is covered under 80CCD(2) and is a separate benefit—not included in 80CCD(1B).
Where Does It Fit in the New Tax Regime?
While the new tax regime offers lower tax rates, it removes most deductions and exemptions, including 80C and 80CCD(1B). That’s why it’s crucial to compare both regimes using the Income Tax Department’s official calculator to decide which one offers you better tax savings based on your income and investments.
Don’t Stop at 80C – Diversify Your Tax Savings
Once you’ve used up your 80C limit, explore:
- Tax savings mutual funds like
- Tata India Tax Savings Fund – Regular Plan Growth
- Tata India Tax Savings Fund – Direct Plan Growth
- Tata India Tax Savings Fund – Regular Plan Growth
- ELSS (Equity Linked Savings Schemes) with a 3-year lock-in and potential for higher returns
- Other options includes PPF, NSC, 5-year tax-saving FDs, life insurance
- Tax-free investments under various sections
- Principal Tax Savings Fund, and more
Monitor fund performance regularly through NAV trackers (e.g., Tata India Tax Savings Fund Regular Plan Dividend NAV).
CTA: Ready to Save Smarter?
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