Gaurav Das earns well, but nearly 14% of his salary goes in tax. Taxspanner estimates that Das can reduce his tax by almost 28% if his pay structure is revised to include more tax-free perks, he opts for the NPS benefit offered by his company and invests more in the scheme on his own.
Das should start by asking his company to offer some common tax-free perks such as reimbursements for conveyance. If he gets Rs 4,000 a month (Rs 48,000 annually) under this head, his tax can be reduced by almost Rs 15,000. Another Rs 15,000 can be saved if he gets Rs 50,000 a year as leave travel assistance (LTA). Both these perks are tax-free on submission of actual bills.
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He should also opt for the NPS benefit offered by his company. Under Sec 80CCD(2d), up to 10% of the basic salary put in NPS is deductible. If Das’ company puts Rs 78,594 (10% of his basic) in the scheme, his tax will reduce by about Rs 24,500.
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Another Rs 15,600 can be saved if he invests Rs 50,000 in the NPS on his own under Sec 80CCD(1b). Das is young, so he should opt for the Aggressive Lifecycle Fund in the NPS. It will allocate 75% to equities and condenses the exposure as the investor grows old.
Das does not have medical insurance. A family floater cover of Rs 5 lakh will cost roughly Rs 20,000 and will reduce his tax by around Rs 6,200.
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(As published in ET Wealth, on April 30, 2018)
