Next, he should ask for more tax free perks. Sinha gets a meagre Rs.18,000 as LTA. LTA is tax-free if claimed twice in a block of four years. If his LTA is increased to Rs.48,000, it will reduce his tax by about Rs.6,200. More tax can be saved if he gets some basic perks such as newspaper bill reimbursements and meal coupons. If he gets Rs.24,000 worth of meal coupons and a newspaper allowance of Rs.1,000 per month, his annual tax will reduce by Rs.7,500.Sinha should also ask his company for a gadget allowance. Under Section 17(2), gadgets bought in the name of the company and given to the employee for personal use are taxed at only 10% of the value. If Sinha gets Rs.48,000 a year (Rs.4,000 per month), his annual tax will reduce by around Rs.10,000.
He should also consider shifting from fixed deposits to debt funds. While interest from deposits is taxed at normal rates, gains from debt funds held for over three years are taxed at a lower rate of 20% after indexation.
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