Save Big Tax with Section 80CCD Benefits

Arjun Ramesh, a finance consultant in Chennai, earns a handsome salary of ₹15 lakh annually but finds his tax liability high due to the fully taxable nature of his pay. With the right use of ***Section 80CCD*** deductions, employer NPS contributions, and personal investments, Arjun can significantly reduce his tax for FY 2026–27.

Arjun’s salary is structured across three heads: basic, HRA, and allowances, all fully taxable. Under the new tax regime, he has limited tax-saving options. By requesting tax-free perks from his employer, he can reduce tax by about ₹35,000. These perks include conveyance allowance (₹60,000), communication allowance (₹12,000), newspaper allowance (₹6,000), and food coupons (₹26,400).

Employer NPS Contributions: Section 80CCD(2) allows employer contributions to NPS to be tax-deductible up to 14% of basic salary under the new regime. If Arjun’s employer contributes ₹10,000 per month, he saves approximately ₹38,000 in taxes annually.

Personal NPS Investment: Additionally, Arjun invests ₹50,000 in his NPS account under Section 80CCD(1), gaining an extra tax deduction of ₹15,600.

Practical Illustration of Tax Savings for FY 2026–27:

Visual Chart of Tax Savings by Component:

• Conveyance: 21%
• Communication: 4%
• Newspaper: 2%
• Food Coupons: 9%
• Employer NPS: 45%
• Personal NPS: 19%

By combining tax-free perks, employer contributions, and personal investments under Section 80CCD, Arjun can efficiently lower his tax liability while continuing to build his retirement corpus.

For ITR filing 2026, Arjun ensures that all NPS contributions and perks are properly declared in ITR-2, and deductions under 80CCD(1) and 80CCD(2) are correctly claimed to maximize tax savings.