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Tax optimiser: Home loan, NPS, medical cover can cut tax by Rs 77,000 for Sinha

Last Updated: Jan 13, 2020, 10.38 AM IST

Summary For the home loan taken, the interest paid to the bank can be claimed as a deduction for a maximum of Rs 2 lakh under section 24. Further, the principal component also offers tax benefit under section 80C.

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More tax can be saved if Sinha buys health insurance for herself and her family.
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By Sudhir Kaushik of Taxspanner.com

Jaipur-based HR manager Aarti Sinha has a very tax friendly salary structure and she avails of the tax deductions available to her. But Taxspanner estimates that Sinha can cut her tax by over Rs 77,000 if her company offers her the NPS benefit, she takes a home loan and buys medical insurance for herself and her family.

Sinha should start by asking her company for the NPS benefit under Section 80CCD(2). Under this, up to 10% of the basic salary put in the scheme is tax free. If her company puts Rs 7,500 (or 10% of her basic pay) in the NPS every month, her annual tax will reduce by Rs 28,000. She already invests Rs 50,000 in the NPS on her own under Sec 80CCD(1b).

Income from employer and other sources

At 36, Sinha should opt for an aggressive asset mix, with the maximum allocation to equity funds. She can also opt for the Aggressive Lifecycle Fund of the NPS, under which the allocation to equity funds is reduced every year to bring down the risk.


Sinha lives in a rented house but a large chunk of her house rent allowance is taxed. She is able to claim exemption for only Rs 68,400. If she buys a house with a loan, she can claim deduction of up to Rs 2 lakh a year for the interest paid on the loan. This can reduce her tax by more than Rs 41,000.


More tax can be saved if Sinha buys health insurance for herself and her family. Though she has group insurance cover, she should buy a cover independently. A cover of Rs 10 lakh will cost about Rs 25,000 a year and will cut her tax by Rs 7,800.

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(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)

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