Chennai-based professional can save Rs 92,000 tax with NPS, other perks; here’s how

Chennai-based finance professional Venkat Subramaniam earns well, but pays a high tax because his salary is not very tax-friendly. With very few tax-saving options, Subramaniam has opted for the new tax regime. TaxSpanner estimates that Subramaniam can reduce his tax by nearly Rs.92,000 if his pay structure includes tax-free perks, his company offers him the NPS benefit and he also invests in the scheme on his own. He can also claim deduction of Rs.1 lakh under Section 80U for his dependant father’s disability.

Subramaniam’s salary structure is very sparse, with just three income heads and is fully taxable. Under the old tax regime, many perks are tax-free. If he gets some tax-free perks, such as conveyance and fuel reimbursement of Rs.60,000 (Rs.5,000 a month), communication allowance of Rs.12,000 (Rs.1,000 per month), newspaper allowance of Rs.6,000 (Rs.500 per month), and food coupons worth Rs.26,400 (Rs.2,200 per month), his annual tax will come down by about Rs.33,000. He should also ask his company for the NPS benefit. Under Section 80CCD(2), up to 10% of the employee’s basic salary put in the pension scheme is tax-free. If his company puts Rs.7,260 (10% of his basic salary) in the NPS on his behalf every month, his annual tax will reduce by about Rs.27,000. Another Rs.15,600 can be saved if he invests Rs.50,000 in the pension scheme on his own.

If his employer does not change the salary structure, Subramaniam should stay in the new regime. He can still save tax by opting for the NPS benefit under Section 80CCD(2). The limit is higher at 14% of the basic in the new regime. If his company puts Rs.10,165 in the NPS every month, his tax will reduce by over Rs.38,000.

WRITE TO US FOR HELP
Paying too much tax? Write to us at etwealth@timesgroup.com with ‘Optimise my tax’ as the subject. Our experts will tell you how to reduce your tax by rejigging your pay and investments.