Tax optimiser: NPS, perks can cut Dand’s tax outgo by Rs 58,000

Mumbai-based finance professional Hitesh Dand pays a high tax because his pay structure is not very tax friendly and he does not avail all the deductions available to him. Taxspanner estimates that Dand can reduce his tax by more than Rs.58,000 if his salary structure is rejigged to include tax-free components, he opts for the NPS benefit offered by his company and he invests in the scheme on his own as well.

Dand should start by opting for the NPS beenfit offered by his company. Under Sec 80CCD(2), up to 10% of the basic salary put in NPS is tax free. If his company puts Rs.5,400 (10% of his basic pay) in the NPS every month, his annual tax will reduce by around Rs.20,000. Another Rs.15,600 can be saved if he invests Rs.50,000 in the NPS on his own. At 36, Dand should opt for an aggressive allocation in the NPS and put the maximum in equity funds.


Next, he should ask his company for some basic tax-free components like conveyance, telephone and newspaper allowance. If he gets Rs.5,000 as monthly conveyance reimbursements, Rs.1,500 for telephone and internet bills, and Rs.500 per month for newspaper and periodicals, his annual tax will reduce by around Rs.17,000. Dand and his family and parents are covered by the group health insurance policy from his employer. He has also opted for a top up by paying Rs.24,000. But group covers continue only till one is employed in the company. Therefore, Dand should purchase health insurance on his own. An additional premium of Rs.21,000 will reduce his tax by almost Rs.6,600.



Paying too much tax? Write to us at etwealth@ 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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