Delhi-based finance professional Shashank Gupta pays low tax because his salary structure is tax-friendly and he avails of several deductions and exemptions. However, there is scope to bring it down further. TaxSpanner estimates that Gupta can reduce his tax by almost half if his company offers him the NPS benefit and replaces the taxable allowances in the salary with some tax-free emoluments.


As a first step, Gupta should ask for the NPS benefit. Under Section 80CCD(2), up to 10% of the basic salary put in the NPS on behalf of the employee is taxfree. If his company puts Rs.2,960 (10% of his basic) in the NPS on his behalf every month, his annual tax will reduce by Rs.7,400. Gupta already invests in the NPS under Sec 80CCD(1b), but puts only Rs.24,000 in the scheme. If he increases this amount to Rs.50,000, he will save another Rs.5,400 in tax. At 26, Gupta should put the maximum 75% in equity funds.Gupta’s salary is tax-friendly, but he should ask for some basic tax-free allowances, such as reimbursement of telephone and newspaper bills. Newspapers and books worth Rs.500 per month and telephone allowance of Rs.500 a month will reduce his annual tax by around Rs.2,500.


More tax can be saved by taking health insurance. Gupta and his parents are covered by the group health insurance from his company, but group covers are not comprehensive. If Gupta buys health insurance for himself and his parents, a premium of Rs.40,000 will cut his tax by around Rs.8,300.Gupta has invested in fixed deposits and earns around Rs.10,000 as interest in a year. If he invests in debt funds instead of fixed deposits, he can defer the tax till withdrawal and bring down his tax outgo by almost Rs.2,100.


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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