Bengaluru-based IT professional Jitesh Lalwani pays a very high tax because his salary structure and investments are tax inefficient. Taxspanner estimates that Lalwani’s tax can be reduced by nearly Rs 1.6 lakh if the pay structure is rejigged, he saves more for retirement and buys health insurance for his family and his mother.
Lalwani should ask his company for reimbursement of certain expenses. If he gets Rs 20,000 a month for fuel and maintenance of car and Rs 8,000 a month for telephone and newspaper bills, his tax will come down by over Rs 1 lakh.
Next, he should ask his company to put 10% of his basic in the NPS under Sec 80CCD(2d). If Rs 81,200 is put in NPS every year, his tax will be cut by Rs 25,000. If he invests Rs 50,000 more in the NPS under Sec 80CCD(1b), his tax can be cut by another Rs 15,450. Lalwani is 35, so he should opt for an aggressive allocation and put 50% in equity funds. Save tax beyond 80C, Optimize Tax Now!
But he must note that NPS funds get locked till retirement. Lalwani and his family enjoy group health insurance but he should also buy a health plan for his mother. A premium of Rs 20,000 will cut his tax by Rs 6,000. Another Rs 8,600 will be saved if he avoids fixed deposits and invests in debt funds.
INCOME FROM EMPLOYER
(As Published in ET Wealth on March 27, 2017)