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Tax optimiser: WFH perks, NPS can reduce Sharma’s tax out go by Rs 84,000


By Sudhir Kaushik of Taxspanner.com

Bengaluru-based consultant Vaibhav Sharma earns well, but pays a high tax. This is because his salary is not very tax-friendly and he does not claim all the deductions available to him. Taxspanner estimates that Sharma can save nearly Rs.84,000 in tax if his salary structure is rejigged, his company offers the NPS benefit, and he invests in the pension scheme on his own as well.

Let us start with the NPS benefit. Under Section 80CCD(2), up to 10% of the basic salary put in NPS is taxfree. If his company agrees to extend this benefit to its employees and puts Rs.9,975 (10% of his basic pay) in the NPS every month, his annual tax will reduce by around Rs.37,000. Another Rs.15,600 can be saved if he invests Rs.50,000 in the NPS on his own.

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At 31, Sharma should opt for an aggressive allocation that puts 75% of the corpus in equity funds. Sharma should also get the conveyance and medical allowance in his package replaced with tax-free reimbursements.

If his phone allowance is increased from Rs.1,000 to Rs.1,500 a month and he gets Rs.1,000 a month as newspaper and periodical allowance, his annual tax outgo will reduce by around Rs.5,600.

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A big tax cut is possible if his company offers some allowances in view of the work-from-home arrangement. Gadgets and furniture can be bought by the company and provided to the employee. The employee gets taxed for only 10% of the value of these items. If Sharma gets items (computers, furniture, AC, etc) worth Rs.60,000 in a year, his tax will reduce by almost Rs.19,000.

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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