Tax optimiser: NPS, perks can help Zutshi cut tax by 63%

Sudhir Kaushik of tells readers how they can optimise their tax by rejigging their income and investments.

Pune-based IT consultant Ayesha Zutshi pays low tax because her pay structure is fairly tax-friendly. However, Taxspanner estimates that Zutshi can reduce her tax by more than 60% if her employer gives her some tax-free perks, if she opts for the NPS benefit offered by her company and also invests in the scheme on her own. She should also buy health insurance for herself. Though Zutshi already gets some tax-free perks, she should ask for meal coupons. If she gets meal coupons of Rs.2,000 per month, her annual tax will reduce by roughly Rs.5,000.


Due to Covid, Zutshi works from home. Since she is bearing the expenses of this arrangement, she should ask for gadget allowance. A monthly allowance of Rs.4,000 will cut her annual tax by around Rs.10,000. Zutshi can save a lot if she opts for the NPS benefit offered by her company. Under Section 80CCD(2), up to 10% of the basic salary put in the NPS is tax-free. If her company puts Rs.3,602 (10% of her basic pay) in the NPS every month, her tax will be cut by Rs.9,000. Another Rs.10,400 can be saved if she invests Rs.50,000 in the NPS on her own under Section 80CCD(1b).


At 28, Zutshi should allocate the maximum 75% to equity funds in the NPS. However, she should understand that NPS investments are locked till retirement. Even at the time of retirement, only 60% of the corpus can be withdrawn, while the remaining 40% has to be put in an annuity to earn a monthly pension. More tax can be saved if Zutshi buys health cover. A premium of Rs.15,000 will cut her tax by Rs.3,000.



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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