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Malavika Anil is 27 and works in Bengaluru. She has not done any tax planning yet and her only tax saving investment is the mandatory PF contribution. As a result, her tax will be close to Rs 23,000 this year. Taxspanner estimates that Malavika can reduce her tax by more than Rs 22,000 if she gets a few tax-free reimbursements, she utilises her Sec 80C investment limit and starts investing in the NPS.
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Malavika’s company has included LTA as a taxable allowance. If this is claimed once in a block of two years for travel, this allowance is tax free. Also, she should ask her company to offer some taxfree perks such as reimbursements of telephone and newspaper bills and also provide food coupons. If she gets Rs 30,000 under these heads, her tax will reduce by about Rs 6,200.
Income from employer
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Income from other sources
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Tax-saving investments
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Other deductions
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Next, she should invest under Sec 80C to reduce her tax. Given her age and the fact that she has no other investments, Malavika should start an SIP of Rs 10,000 in an ELSS fund. She should also buy a term plan of Rs 1 crore. It will cost her about Rs 8,000-9,000 a year. These two steps will reduce her tax by almost Rs 10,000. Another Rs 5,200 can be saved if she invests Rs 50,000 in the NPS under Sec 80CCD(1b). But this will also reduce her taxable income to less than Rs 3.5 lakh, making her eligible for a relief of Rs 2,500 under Sec 87A.
She can cut her tax further with a medical insurance plan for herself and her parents. A premium of Rs 24,000 will cut her tax by Rs 1,248.
