If you invest in the National Pension System (NPS), you are eligible for an additional tax deduction of Rs50,000. Under section 80CCD of the Income-tax Act, 1961, 10% of the salary contributed in the NPS is eligible for a tax deduction of up to Rs1.5 lakh.
You also get an extra deduction of Rs50,000 under section 80CCD (1b) of the Act. The deduction of Rs1.5 lakh is capped with the overall deduction limit of section 80C, which takes up your total deduction limit from Rs1.5 lakh to Rs2 lakh under this section. The extra deduction of Rs50,000 was announced last year to encourage investments in the NPS.