EPF vs NPS: Which Scheme Can Help You Save More Tax in 2026?
With the Income Tax Return (ITR) filing deadline of July 31, 2026, drawing closer, salaried taxpayers are looking for smart ways to reduce their tax burden while building long-term savings. Two of the most popular government-backed retirement schemes, Employees' Provident Fund (EPF) and National Pension System (NPS), continue to play a key role. However, the tax benefits you receive depend entirely on whether you choose the old or the new tax regime .
Old Tax Regime : Maximum Tax Savings
The old tax regime remains attractive for taxpayers who claim deductions through investments.
Employee contributions to EPF qualify for a deduction of up to Rs 1.5 lakh under Section 80C of the Income Tax Act.
In addition, voluntary investments in an NPS Tier I account are eligible for an extra deduction of Rs 50,000 under Section 80CCD(1B).
By using both benefits together, eligible taxpayers can reduce their taxable income by as much as Rs 2 lakh in a financial year.
New Tax Regime: Fewer Personal Deductions
The new tax regime, now the default option, offers lower tax rates but removes most investment-linked deductions.
This means taxpayers cannot claim deductions under Section 80C for EPF contributions or the additional Section 80CCD(1B) deduction for self-contributions to NPS. As a result, personal investments in these schemes no longer provide direct tax relief under the new regime.
Employer NPS Contribution Still Offers Tax Benefits
Although most deductions are unavailable in the new regime, one major tax advantage remains.
Under Section 80CCD(2), an employer's contribution to an employee's NPS account continues to be tax-efficient. Employers can contribute up to 14% of the employee's basic salary plus dearness allowance (DA), and this contribution remains tax-free in the hands of the employee.
Old Tax Regime : Maximum Tax Savings
The old tax regime remains attractive for taxpayers who claim deductions through investments. Employee contributions to EPF qualify for a deduction of up to Rs 1.5 lakh under Section 80C of the Income Tax Act.
In addition, voluntary investments in an NPS Tier I account are eligible for an extra deduction of Rs 50,000 under Section 80CCD(1B).
By using both benefits together, eligible taxpayers can reduce their taxable income by as much as Rs 2 lakh in a financial year.
New Tax Regime: Fewer Personal Deductions
The new tax regime, now the default option, offers lower tax rates but removes most investment-linked deductions. This means taxpayers cannot claim deductions under Section 80C for EPF contributions or the additional Section 80CCD(1B) deduction for self-contributions to NPS. As a result, personal investments in these schemes no longer provide direct tax relief under the new regime.
Employer NPS Contribution Still Offers Tax Benefits
Although most deductions are unavailable in the new regime, one major tax advantage remains.
Under Section 80CCD(2), an employer's contribution to an employee's NPS account continues to be tax-efficient. Employers can contribute up to 14% of the employee's basic salary plus dearness allowance (DA), and this contribution remains tax-free in the hands of the employee.
Next Story