How Delhi Based Kumar Can Save Rs 82,000 Tax by Using Home Loan Tax Break, Investing in NPS

(As published in ET Wealth on November 7, 2016)
Surender Kumar pays almost 10% of his income in tax. Although he has a taxfriendly pay structure, Taxspanner estimates that the Delhi-based manager can cut his tax by nearly Rs 82,000 if he utilises the tax benefit offered on his home loan and puts more into the NPS.
Kumar has just got possession of his flat in Greater Noida, but he will continue to stay in a rented house in Delhi. If the new flat is given out on rent, Kumar can claim tax benefits on the home loan. The entire Rs 2.6 lakh he pays as interest on the loan can be claimed as a deduction. It will reduce his tax by almost Rs 68,000. But the rent will be taxed as income after a 30% deduction. A monthly rent of Rs 8,000 will lead to a tax of Rs 1,154 a month.
Kumar should also ask his employer to rejig his pay structure and put 10% of the basic pay in the NPS under Sec 80CCD(2d). If Rs 74,500 is put in the NPS every year, his tax will reduce by Rs 15,350. But his monthly take-home pay will also dip by almost Rs 5,000. If Kumar puts another Rs 50,000 in the NPS under Sec 80CCD(1b), it will cut his tax by Rs 10,300.
Kumar has interest income from fixed deposits. If he shifts his money to debt funds, he can defer the tax and reduce the tax outgo by Rs 2,163.
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