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    Tax optimiser: NPS, perks can help Yadalam reduce tax outgo by Rs 87,000

    Synopsis

    Yadalam should opt for the NPS benefit offered by his company. Under Sec 80CCD(2), up to 10% of the basic salary put in the scheme is tax free.

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    You should opt for the NPS benefit offered by your company.
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    By Sudhir Kaushik of Taxspanner.com

    Bengaluru-based software professional Rakesh Yadalam earns a good salary and rental income, but a good chunk goes in tax because his pay structure is not very tax friendly and he doesn’t claim all the deductions available to him.

    Taxspanner estimates that Yadalam can reduce his tax by Rs 87,000 if his company offers him some tax-free perks, he opts for the NPS benefit offered by his company and invests in the scheme on his own.

    Income from employer

    27-1

    Income from other sources

    27-2

    Yadalam does not get any LTA or reimbursement of fuel expenses. If he gets Rs 4,000 as reimbursement of fuel expenses and Rs 1,000 for newspapers and books per month, his annual tax will reduce by around Rs 19,000. If his company gives him Rs 60,000 as LTA (which is tax free if used once in a block of two years), his tax will come down by another Rs 19,000.

    Tax-saving investments

    27-3

    Other deductions


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    Next, he should opt for the NPS benefit offered by his company. Under Sec 80CCD(2), up to 10% of the basic salary put in the scheme is tax free. If Yadalam’s company puts Rs 6,011 (10% of his basic) in the scheme every month, his annual tax will reduce by about Rs 22,500. Another Rs 15,600 can be saved if he invests Rs 50,000 in the scheme on his own under Sec 80CCD(1b).

    Rakesh Yadalam’s tax

    27 5

    At 35, Yadalam should opt for an aggressive allocation that puts the maximum 75% in equity funds. Yadalam’s company offers group medical cover but he should buy one separately. A medical cover of Rs 5 lakh for his family and parents will cost him about Rs 25,000 and will cut his tax by roughly Rs 7,800.
    (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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