Agarwal gets a very high LTA of Rs.2 lakh a year, but is not able to utilise the full amount. As a result, almost Rs.1.4 lakh of this amount gets taxed. He also gets meal coupons worth Rs.60,000 and a medical allowance, which became taxable a few years ago. He should ask his company to remove the medical allowance and reduce the LTA to Rs.63,000. Instead, he should ask for a gadget allowance. Under Section 17(2), gadgets and appliances bought in the name of the company and given to the employee for personal use are taxed at only 10% of the value.
If he gets a gadget allowance of Rs.1.5 lakh, his tax can come down by Rs.44,000. Next, Agarwal should rejig his investments. He is already investing in the NPS, but only through his employer. If he puts an additional Rs.50,000 in the low cost pension scheme under Section 80CCD(1b), another Rs.15,600 can be saved. At 29, Agarwal should opt for an aggressive allocation that puts 75% of the corpus in equity funds. Agarwal claims deduction for the Rs.27,000 he pays for his senior citizen father’s medical insurance. He should also include his mother in the plan and buy medical insurance for himself and his wife. The additional premium of Rs.48,000 will shave off nearly Rs.15,000 from his annual tax.
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