You will benefit immensely if you convince your employer to restructure your cost to the company (CTC) without incurring any additional burden. A unique feature of NPS is the tax benefit it offers under the newly added Section 80CCD(2). It will work only when the employer also invests in NPS; so negotiate with your employer as soon as possible. Under this Section, if an employer contributes 10% of the basic salary plus dearness allowance to the NPS account of an employee, it gives excellent tax benefit to the employee. The best part is that such contributions are not included in the Rs1 lakh exemption limit that you can avail under Section 80C and the employer can show his contribution as deduction from the business income under Section 36 I (IV) A. It is a win-win situation for the employer and the employee, as it is tantamount to the employer giving a raise to the employee without really giving anything! Again, the employer’s contribution will go in for Tier-1 NPS, but it may be worth it for the employee due to the tax savings—provided, of course, he is committed to saving for the long term through the NPS. 

 

Here is how 80CCD (2) works.