Taneja has opted for the minimum contribution of Rs.1,800 per month (Rs.21,600 per year) to the Provident Fund. If he increases this to 12% of his basic salary, his employer will also increase the contribution to Rs.1.65 lakh per year and, accordingly, reduce the taxable special allowance. This will cut Taneja’s take-home pay, but will save him almost Rs.45,000 in tax.
Next, he should ask for some more tax-free perks, such as gadget allowance and reimbursement of newspaper expenses. Under Section 17(2), gadgets bought for personal use are taxed at only 10% of the value. This deduction came into focus during the work-fromhome arrangement induced by Covid. If Taneja buys gadgets and appliances worth Rs.60,000 in a year, his tax will be reduced by about Rs.17,000. If he gets books and newspaper allowance of Rs.12,000 (Rs.1,000 per month), his tax will come down by Rs.3,750.
Taneja and his family are covered by group health insurance offered by his company. However, he should buy health insurance separately as well. A premium of Rs.25,000 will give the family a cover of almost Rs.10 lakh. This will also reduce his tax outgo by Rs.7,800.
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