EMPOLYER CONTRIBUITION IN NPS 80CCD2 IS TAXABLE OR NOT

In respect of employer’s contribution toward NPS account of an employee, deduction under Section 80CCD (2) is available to an employee. The deduction under Section 80CCD (2) is available upto 10% of the basic salary and dearness allowance of the employee. For the Central and State government employee a higher deduction of 14% of contribution as percentage of basic salary is available.

Though there is no overall limit for deduction in respect of employer’s contribution towards NPS account of an employee under Section 80CCD (2) but Section 17(2) of the Income Tax Act provides that in case aggregate of employer’s contribution towards employee’s employee provident fund, National Pension System and Superannuation exceeds seven lakhs fifty thousand in a year, the excess shall be taxed as perquisite in the hands of the employee.

So effectively an employee can claim deduction upto Rs. 7.50 lakhs for employer’s contribution to his NPS account in a year.  

What about the PSU bank employees , are they eligible for 14% deduction like central govt employees ??

No. they are eligible upto 10% deduction only.