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Tax optimiser: NPS, perks can help salaried Kumar save Rs 66,000 in tax

You should always ask your employer for the NPS benefit and also invest in the scheme on your own. This way you can reduce your tax outgo significantly.

Updated: May 27, 2019, 10.06 AM IST
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Up to 10% of the basic salary put in NPS is tax free. Thus, you should opt for the NPS benefit offered by your company.
By Sudhir Kaushik of

Bengaluru-based software professional Ambuj Kumar pays a high tax because his salary is packed with taxable allowances and perks that offer little relief. He also doesn’t avail of all the tax deductions available to him.

Taxspanner estimates that Ambuj Kumar can save nearly RS 67,000 in tax if he opts for the NPS benefit offered by his company and invests in the scheme on his own. Also, some of the taxable allowances in his salary should be replaced with taxfree perks.

Income from employer


Income from other sources


Ambuj Kumar should opt for the NPS benefit offered by his company under Section 80CCD(2). Up to 10% of the basic salary put in NPS is tax free. If his company puts Rs 5,785 (10% of his basic) in the NPS every month, it will cut his annual tax by around Rs 21,500. Another Rs 15,600 can be saved if he invests Rs 50,000 in NPS on his own. At 34, he should opt for an aggressive allocation with the maximum 75% in equity funds.

Tax-saving investments


Other deductions

If he doesn’t have enough liquidity to invest in the NPS, Ambuj Kumar should reduce his contribution to the PPF to the minimum Rs 500 in a year.

Ambuj Kumar’s tax


Many of the allowances in his pay package are taxable. The conveyance, medical and children’s education allowance should be replaced with reimbursements of telephone bills (Rs 1,000 a month), books and periodicals (Rs 815 a month). He should also ask for leave travel assistance (Rs 72,000 a year). Together, these will save him roughly Rs 29,500 in tax.

Write to us for help
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.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of

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