Published 9 May 2026
Tax Deductions You Should Not Miss
The Agnipath Scheme (introduced 2022 for short-term armed forces enrolment) and the National Pension System offer some of the most overlooked tax benefits in Indian salaried tax. Finance Act, 2024 enhanced both. This article unpacks both schemes.
National Pension System Tier-I -- The Three Sub-Sections
Sub-Section | Contribution Type | Limit |
|---|---|---|
Section 80CCD(1) | Self contribution | Up to 10% of salary (employees) / 20% of gross total income (self-employed) WITHIN the INR 1.5 lakh section 80CCE umbrella |
Section 80CCD(1B) | Additional self contribution | INR 50,000 -- ABOVE the section 80CCE umbrella |
Section 80CCD(2) | Employer contribution | Up to 14% of basic in NEW REGIME (Finance Act, 2024); 10% in old regime; PRESERVED in new regime |
Strategic National Pension System Planning
Salaried with INR 12 lakh basic salary:
- Section 80CCE: INR 1.5 lakh from Public Provident Fund / Equity Linked Savings Scheme / Life Insurance.
- Section 80CCD(1B): self-National Pension System INR 50,000 (additional).
- Section 80CCD(2): employer National Pension System at 14% of INR 12 lakh basic equals INR 1.68 lakh (preserved in new regime).
- Total National Pension System ecosystem: INR 50,000 plus 1.68 lakh equals INR 2.18 lakh tax-free contribution annually.
Maturity (60% withdrawal) tax-free; 40% mandatory annuity. Effective for senior salaried planning retirement corpus.
National Pension System Vatsalya (Finance Act, 2024)
Finance Act, 2024 introduced National Pension System Vatsalya -- minor child National Pension System account opened by parent. Parent contributes; matures at child's 18-plus years. Tax treatment: contributions under section 80C (within section 80CCE umbrella). Withdrawal at 18: rolled into regular National Pension System. Encourages early retirement planning for the next generation.
The Agnipath Scheme -- Section 80CCH
Finance Act, 2023 introduced section 80CCH for Agniveers enrolled in the Agnipath Scheme. Tax framework:
Element | Tax Treatment |
|---|---|
30% MANDATORY EMPLOYEE CONTRIBUTION to Agniveer Corpus Fund | Deductible under section 80CCH |
MATCHING GOVERNMENT CONTRIBUTION to Agniveer Corpus Fund | Deductible / treated as not income |
On exit (after 4-year service): lump-sum 'Seva Nidhi' | Entirely EXEMPT under section 10(12C) |
Death-in-service: ex-gratia plus Seva Nidhi to nominee | Entirely exempt |
PRESERVED in new regime under section 115BAC. Effective tax-neutral framework for the entire scheme.
Agniveer Tax Profile -- A Full Picture
Agniveer enrolled 1 November 2022 onwards. Monthly emoluments from the Government (taxable as salary). 30% to Agniveer Corpus Fund. Government matches. Annual 4-year service. Exit Seva Nidhi entirely exempt under section 10(12C).
Effective: emoluments taxable; Agniveer Corpus Fund contributions deductible (section 80CCH); exit lump-sum exempt. Tax-friendly for the scheme.
Practitioner Note For the Agniveer cohort, prepare Income-tax Return Form 1 / Form 2 with Schedule SI for section 10(12C) exempt income disclosure. |
Combined Strategy
- For senior salaried (non-Agniveer): combine section 80CCD(2) employer National Pension System plus section 80CCD(1B) self plus section 80CCE (with Public Provident Fund / Equity Linked Savings Scheme) equals INR 2 lakh or more relief.
- For Agniveer: section 80CCH Agniveer Corpus Fund plus section 10(12C) exit exemption equals full scheme tax-neutral.
- For young first-time job (any sector): start National Pension System early; INR 50,000 section 80CCD(1B) over 30 years equals corpus of INR 6 crore or more at 8% returns.
Key Takeaways
- National Pension System section 80CCE plus 80CCD(1B) INR 50,000 plus 80CCD(2) employer 14% (new regime) equals INR 2 lakh or more relief.
- Section 80CCD(2) PRESERVED in new regime under section 115BAC.
- Section 80CCH (Finance Act, 2023) Agniveer Corpus Fund deduction.
- Section 10(12C) Seva Nidhi lump-sum exempt at exit.
- Finance Act, 2024 enhanced employer National Pension System cap to 14% in new regime (private parity with Government).
- National Pension System Vatsalya (Finance Act, 2024): minor child National Pension System for early retirement planning.
- Maturity: 60% tax-free withdrawal; 40% mandatory annuity (taxable as Other Sources).
Disclaimer: This article is for general information only. It does not constitute tax / legal advice. Please consult a qualified Chartered Accountant or tax practitioner for advice specific to your circumstances. The legal position is current as of FA 2024 (No. 2) / FA 2025; subsequent amendments and CBDT notifications may modify the position.