Sankaran Narayanan, 34, works for a company that lets employees restructure their salary structure. TaxSpanner estimates that the Bengaluru-based professional can reduce his tax by nearly Rs 45,000 if he puts more into the NPS and buys health insurance for his family.
Narayanan should start by asking his company to put 10% of his basic pay in the NPS under Section 80CCD(2d). If Rs. 79,860 is put in the NPS every year, his tax will reduce by nearly Rs. 25,000. But this will reduce his take-home pay by almost Rs 4,600 per month. The NPS can reduce his tax further if Narayanan puts Rs. 50,000 in the scheme under Section 80CCD(1b). This will cut his tax by another Rs. 15,450. Save tax beyond 80C, Optimize Tax Now!
In recent months, the NPS has given terrific returns due to the twin rallies in the bond and equity markets. Given his age, Narayanan should opt for the aggressive lifecycle fund of the NPS which allocates 75% to equities till the age of 35. The exposure to equity comes down by 2% every year.
Narayanan has group medical cover but wants to buy on his own for better coverage. A floater cover of Rs 5-6 lakh will cost around Rs 15,000 and will cut his tax by about Rs 4,600.
(As Published in ET Wealth on Oct 3, 2016)