Salary structure
Does employer NPS fit your cash budget?
Tax saved and cash available are different numbers. Compare the same CTC with and without NPS, including what moves into your retirement account.
Select Compare to see the result. JavaScript is required; the worked example below is available without it.
A tax saving is not a salary increase
If employer NPS is inside fixed CTC, the contribution reduces cash salary. The deduction can offset part of that reduction, but the contribution remains in a retirement account. Budget rent and EMIs using the cash figure, not cash plus NPS. If your employer adds NPS on top, include it in total CTC before comparing.
A worked example
At ₹15,00,000 CTC and 40% basic, 14% employer NPS means ₹84,000 invested annually. With capped PF, 4.81% gratuity, ₹2,400 professional tax and no employee NPS, the new-regime model saves ₹13,104 income tax. Annual cash take-home falls by ₹70,896: the ₹84,000 contribution minus that saving. This is ₹5,908 less spendable cash each month, alongside ₹7,000 a month directed to retirement.
How the comparison works
Both scenarios keep employer CTC and basic constant. Cash salary is CTC less employer PF, gratuity and employer NPS. Taxable salary includes employer NPS before its permitted deduction. Employee PF, professional tax, income tax and voluntary employee NPS are then removed from cash. The baseline has no employer or employee NPS.
For this private-sector model, employer NPS deduction is capped at 10% of basic in the old regime and 14% in the new. Employee 80CCD(1B) is capped at ₹50,000 and deductible only in the old regime; the contribution reduces cash in either regime. No HRA, additional 80C/80D or home-loan deductions are assumed. The model covers resident, below-60 ordinary salary income.
The ₹7.5 lakh aggregate rule concerns employer contributions to recognised PF, NPS and approved superannuation, not employee contributions. This model includes capped employer PF and NPS and assumes no superannuation. Excess employer contributions are a taxable perquisite; annual accretion on previous excess contributions is outside scope. Government employees and complex packages need their actual payroll treatment.
Before choosing
Check your employer's policy, current withdrawal rules and your need for accessible savings. A lower tax bill alone does not decide whether more retirement saving suits you. Compare the cash result with the monthly budget you need to fund.
Sources: official employee-benefits table, new-regime provisions, resident rebates. Check applicable periods and the method and scope.