Banker shows how a ₹50,000 NPS trick can cut your tax bill by over ₹15,000
The trick involves Section 80CCD(1B) of the Income Tax Act, which allows an additional ₹50,000 deduction exclusively for investments in the National Pension System (NPS).
- Sep 14, 2025,
- Updated Sep 14, 2025 9:43 AM IST
A Maharashtra-based banker shared a practical tip on LinkedIn that helped a friend save ₹15,600 in taxes—just by using an often-overlooked NPS deduction.
Rahul Deshmukh, a banker from Maharashtra, posted a short anecdote on LinkedIn: “A friend of mine was cribbing about paying too much tax. I asked him: ‘Have you used the extra ₹50,000 NPS trick?’ He hadn’t. One click later → he saved ₹15,600 in tax this year itself.”
The trick involves Section 80CCD(1B) of the Income Tax Act, which allows an additional ₹50,000 deduction exclusively for investments in the National Pension System (NPS). This is over and above the ₹1.5 lakh deduction under Section 80C. For someone in the 30% tax bracket, that’s a direct saving of ₹15,600.
Deshmukh’s post also outlined a simple NPS playbook:
- Tier I: Best used for long-term retirement savings and claiming the ₹50,000 tax benefit.
- Tier II: Functions like a low-cost mutual fund with no lock-in—ideal for flexible, short-term investing.
- Tier II Tax Saver: A niche option for Central Government employees that offers ELSS-style benefits with a 3-year lock-in.
He also recommended going equity-heavy when young, shifting to debt near retirement, and switching Pension Fund Managers if they underperform.
While NPS is often seen as a slow-moving retirement tool, Deshmukh called it a “triple play: Save tax today, compound wealth tomorrow, secure dignity at 60.”
A Maharashtra-based banker shared a practical tip on LinkedIn that helped a friend save ₹15,600 in taxes—just by using an often-overlooked NPS deduction.
Rahul Deshmukh, a banker from Maharashtra, posted a short anecdote on LinkedIn: “A friend of mine was cribbing about paying too much tax. I asked him: ‘Have you used the extra ₹50,000 NPS trick?’ He hadn’t. One click later → he saved ₹15,600 in tax this year itself.”
The trick involves Section 80CCD(1B) of the Income Tax Act, which allows an additional ₹50,000 deduction exclusively for investments in the National Pension System (NPS). This is over and above the ₹1.5 lakh deduction under Section 80C. For someone in the 30% tax bracket, that’s a direct saving of ₹15,600.
Deshmukh’s post also outlined a simple NPS playbook:
- Tier I: Best used for long-term retirement savings and claiming the ₹50,000 tax benefit.
- Tier II: Functions like a low-cost mutual fund with no lock-in—ideal for flexible, short-term investing.
- Tier II Tax Saver: A niche option for Central Government employees that offers ELSS-style benefits with a 3-year lock-in.
He also recommended going equity-heavy when young, shifting to debt near retirement, and switching Pension Fund Managers if they underperform.
While NPS is often seen as a slow-moving retirement tool, Deshmukh called it a “triple play: Save tax today, compound wealth tomorrow, secure dignity at 60.”