Tax Optimiser: How NPS, perks can help salaried Mohanty cut tax by Rs 76,000
Taxspanner estimates that Mohanty can reduce his tax by almost Rs 76,000 if he gets more tax-free perks and his company offers him NPS benefit.
Taxspanner estimates that Mohanty can reduce his tax by almost Rs 76,000 if he gets more taxfree perks, his company offers him NPS benefit and he invests more in the scheme on his own. Mohanty should start by asking for more tax-free perks.
The medical reimbursement and conveyance allowance are now taxable following the introduction of standard deduction. These can be replaced with the newspaper and telephone reimbursements. These perks are tax free against submission of actual bills. This will save him Rs 10,600 in tax. The big saving in tax will come if his company offers him the NPS benefit. Under Sec 80CCD(2d), up to 10% of the basic salary put in NPS is deductible. If he opts for this, his tax will reduce by about Rs 40,500.
Another Rs 15,600 can be saved if he invests Rs 50,000 in the NPS on his own under Sec 80CCD(1b). Given his young age, he should opt for the Aggressive Lifecycle Fund which puts 75% in equities. Mohanty has started a recurring deposit to save for paying off his home loan. The interest on a recurring deposit is fully taxable. Instead of earning 7% interest on the recurring deposit and then paying tax on that income, Mohanty should simply increase his home loan EMI and save the 8.5% interest he pays on the loan.
Income from employer
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