Can Employees Ask Employers for NPS and Other Deductions in the New Tax Regime?

Sep 7, 2025

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The Indian government has made the new tax regime the default system from FY 2023–24 onwards. While it offers lower slab rates, it restricts most of the deductions and exemptions that employees earlier used to claim in the old tax regime.

This often leads to a common question:
👉 Can an employee ask the employer to provide benefits like NPS or other deductions in the new tax regime?

Let’s break it down in detail.

📌 New Tax Regime – At a Glance

Income Slab (FY 2023–24 onwards)	Tax Rate
0 – ₹3 lakh	Nil
₹3 – 6 lakh	5%
₹6 – 9 lakh	10%
₹9 – 12 lakh	15%
₹12 – 15 lakh	20%
Above ₹15 lakh	30%

✅ Rebate under section 87A: If total income ≤ ₹7 lakh, no tax.
✅ Standard deduction: ₹50,000 available to salaried employees and pensioners.

✅ Deductions Allowed in New Regime

Unlike the old regime, the new one restricts exemptions. But some tax-saving options are still allowed:

Deduction / Benefit	Allowed?	Who Provides
Standard Deduction ₹50,000	✅ Yes	Automatically available
Employer’s NPS Contribution (80CCD(2))	✅ Yes	Employer can contribute up to 10% of Basic + DA (14% for govt employees)
Employer’s EPF Contribution	✅ Yes	Exempt up to ₹7.5 lakh combined with NPS + Superannuation
Transport Allowance (Disabled Employees)	✅ Yes	Employer
Official Reimbursements (fuel, internet, gadgets, etc.)	✅ Yes	Employer

🏦 Can an Employee Ask Employer to Contribute to NPS?

Yes! Employees can request HR/Payroll to structure part of their CTC into Employer NPS Contribution.

Example: If your Basic + DA = ₹6,00,000, the employer can contribute up to ₹60,000 (10%) to NPS.
This ₹60,000 is fully deductible under section 80CCD(2) even in the new tax regime.
You save tax on the entire amount.

👉 This is the biggest tax-saving hack in the new regime for salaried employees.

📊 Example Calculation – With and Without Employer NPS

Let’s take an employee with ₹12,00,000 annual salary under the new regime.

Particulars	Without Employer NPS	With Employer NPS (₹1,20,000)
Gross Income	₹12,00,000	₹12,00,000
Standard Deduction	(₹50,000)	(₹50,000)
Employer NPS Deduction	Nil	(₹1,20,000)
Taxable Income	₹11,50,000	₹10,30,000
Approx. Tax Payable	₹91,000	₹66,000
Tax Saved	—	✅ ₹25,000

💡 Just by asking your employer to put money into NPS, you can save ₹25,000+ every year.

🚀 Other Smart Salary Structuring Options

Ask for part of salary as NPS (employer contribution).
Check for EPF contributions (these remain tax-free).
Use reimbursements instead of allowances – fuel, internet, gadgets for work.
Opt for company-provided health insurance (cashless benefit, not taxed).
Check if company provides food coupons, travel cards, or flexible benefit plans.

⚖️ Conclusion – Should You Ask for NPS in the New Tax Regime?

The new regime limits deductions, but Employer’s NPS Contribution is still a golden opportunity.
Employees should request employers to include NPS in salary structuring.
Renting and reimbursement-based benefits can further optimize taxes.

✅ Final Word: If you are in the new regime, the smartest move is to ask your employer to make 10% of Basic + DA contribution to NPS. This ensures long-term retirement savings + instant tax benefit.