Tax Saving | Tax optimiser: HRA, NPS and perks can help Priyanka reduce tax by 66%

By Sudhir Kaushik of

Hyderabad-based IT professional Priyanka Vijay has just got a raise, which will put her in the tax net. Though her salary structure is tax friendly, Vijaykumar is unable to claim some of the exemptions and deductions available to her. Taxspanner estimates that Vij can save almost Rs 1 lakh in tax if she pays a higher rent, her salary structure is rejigged and she invests in the NPS.

Income from employer

Vijaykumar lives with her parents and pays them a rent of Rs 15,000 per month. This covered her HRA till now, but she now draws Rs 25,000 as HRA. To make this tax free, she will have to increase the rent payment to Rs 31,000 per month. This will reduce her tax by almost Rs 42,000.

Tax saving investments


Next, she should ask her company for the NPS benefit. Under Sec 80CCD(2), up to 10% of the basic salary put in NPS is tax free. If her company puts Rs 6,250 (10% of her basic pay) in the NPS every month, her tax will be cut by Rs 23,400. Another Rs 15,600 can be saved if she invests Rs 50,000 in the NPS on her own.


Vijaykumar should also ask her company to rejig her allowances. Being single, she may not be able to utiise the Rs 75,000 LTA. Instead, she should get reimbursed for gadgets and furniture. The employee gets taxed for only 10% of the value of these items. If Vijaykumar gets items (computers, furniture, AC, etc) worth Rs 60,000 in a year, her tax will reduce by around Rs 11,200. Vijaykumar has group medical cover, but her parents are not included. If she buys a medical plan for them for Rs 40,000, she can save Rs 8,300 in tax.

Write to us for help

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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