Hyderabad-based engineer Rutuj Patil earns well, but more than a fifth of his income goes in tax even though he claims most of the deductions available to him. TaxSpanner estimates that Patil can reduce his tax by almost Rs.65,000 if his company rejigs his pay structure to include some tax-free emoluments and he increases the contribution to the NPS to 10% of his basic salary.

Patil should start with the NPS. Under Section 80CCD(2), up to 10% of the basic salary put in the NPS on behalf of the employee is tax-free, but Patil has opted for a monthly contribution of only 5% of his basic pay. If he hikes the contribution to the maximum 10%, his tax will reduce by about Rs.22,000. Since he already invests in the NPS, Patil knows how the scheme works and the allocation that suits him.


Next, Patil should ask his company to replace the taxable emoluments in his salary with some tax-free perks, such as gadget allowance and reimbursement of newspapers bills. 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 their value. This perk came into focus during the ‘work from home’ phase after the Covidinduced lockdown. If Patil buys items such as computers, white goods and ACs worth Rs.1.2 lakh in a year (Rs.10,000 per month), his annual tax will be reduced by around Rs.37,500. Newspapers and books worth Rs.12,000 (Rs.1,000 per month) will reduce the tax further by around Rs.3,750.


More tax can be saved if Patil invests in debt funds instead of fixed deposits. While the interest from deposits is taxed every year, the gains from debt funds are taxed only in the year of withdrawal.


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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