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Tax optimiser: NPS, health insurance can help Kohli save Rs 33,000 tax

Not only should you ask your employer for the NPS benefit, but you should also invest in the scheme on your own. You can reduce your tax outgo significantly.

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Last Updated: Feb 10, 2020, 09.49 AM IST
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By Sudhir Kaushik of Taxspanner.com

Noida-based finance professional Sanjeev Kohli pays a high tax because his salary package has very few tax-free perks. This despite the fact that he claims exemption for HRA as well as deduction for home loan interest.

Taxspanner estimates that Kohli can reduce his tax marginally by about Rs 30,000 if he opts for the NPS benefit from his company and buys more medical insurance.

Income from employer
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Income from other sources
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Kohli should start by opting for the NPS benefit offered by his company. Under Sec 80CCD(2), up to 10% of the basic salary put in NPS is tax free. If his company puts Rs 5,514 (10% of his basic pay) in the NPS on his behalf every month, his tax will reduce by about Rs 21,000. Kohli already invests in the NPS under Section 80CCD(1b) so he knows how the scheme works.

Tax-saving investments
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Other deductions
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Kohli and his family are covered by group medical insurance. Group insurance is helpful but ceases when the person leaves the job or retires. Kohli should buy a separate plan for himself and his family. He has also bought a policy for his senior citizen parents. But the cover of Rs 2 lakh is not enough. He should enhance the cover. An additional premium of Rs 30,000 will reduce his tax by roughly Rs 9,500.

Sanjeev Kohli’s tax
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More tax can be saved if he switches from fixed deposits to debt funds. Interest from fixed deposits is fully taxable as income every year. In debt funds, gains are taxed only at the time of redemption. If the holding period exceeds three years, there is indexation benefit and the tax rate is lower at 20%.

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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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