Tax optimiser: How salaried Tushar can save Rs 1.3 lakh tax via perks, NPS 

Not only should you ask your employer/company for the NPS benefit, but you should also invest in the scheme on your own. You can reduce your tax outgo significantly. 

 

Hyderabad-based software professional Tushar Ranka pays a very high tax because his pay structure is not very tax friendly. Except for LTA, he does not get any other tax-free perk or allowance. “Our company wants to keep the pay structure very simple to avoid questions from the tax authorities,” he says. Taxspanner estimates that Ranka can reduce his tax by more than Rs 1.3 lakh if his company gives him some basic tax-free allowances and the NPS benefit. He should also invest in the scheme on his own.

Ranka should start by asking his company to reimburse basic expenses (fuel, transport, newspaper and telephone). If he gets Rs 750 for newspapers and magazines, Rs 3,000 for telephone and internet, and Rs 2,200 worth of food coupons per month, his tax can come down by roughly Rs 22,000. Another Rs 56,000 can be saved if he gets Rs 15,000 a month for fuel and conveyance. These perks are tax-free against submission of actual bills and usage. 

Next, Ranka should ask his company to offer the NPS benefit. Under Sec 80CCD(2), up to 10% of the basic salary put in the scheme is deductible. If his company puts Rs 10,000 (10% of his basic) in the scheme every month, his annual tax will reduce by about Rs 37,500. Another Rs 15,600 can be saved if Ranka invests Rs 50,000 in the scheme on his own. 

Given his age (he is 43), Ranka should opt for a balanced allocation in the NPS, dividing his corpus across equity, corporate debt and gilt funds. 

Income from employer

Income from other sources

Tax-saving investments