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How to lower tax burden: Patna-based PSU bank manager can cut tax by Rs 32,261 by tweaking salary structure

How to lower tax burden: Patna-based PSU bank manager can cut tax by Rs 32,261 by tweaking salary structure


Patna-based PSU bank manager, Nitish Pandey, pays a high tax because his salary structure is very tax-inefficient. Though he avails of all the deductions and exemptions available, nearly all the allowances he gets are taxable. TaxSpanner estimates that Pandey can reduce his tax marginally by Rs.32,000 if some of the taxable allowances are replaced with tax-free perks and he buys health insurance for his parents.

Pandey should ask his employer to replace the taxable conveyance and medical allowances with meal coupons and newspaper allowance. If he gets newspaper allowance of Rs.9,000 (Rs.750 per month) and food coupons worth Rs.26,400 (Rs.2,200 per month), his tax will reduce by about Rs.11,000. Communication reimbursement of Rs.12,000 (Rs.1,000 per month) will shave off another Rs.3,800 from his tax outgo. Offering these allowances will not add to his employer’s paperwork because employee benefit solutions, such as Zaggle Save, can manage these perks digitally.

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Pandey should consider shifting out of fixed deposits to debt mutual funds or arbitrage schemes. While the interest earned on fixed deposits is taxed at the slab rate every year, gains from debt funds are taxed only at the time of withdrawal. If held for more than a year, the gains from arbitrage funds are tax-free up to Rs.1.25 lakh in a year.

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Though he and his family are covered by the group health insurance from his employer, Pandey has bought a medical cover separately. He should consider buying health insurance for his senior citizen parents as well. An annual premium of Rs.50,000 will reduce his tax by Rs.15,600.

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.



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