Tax optimiser: How salaried Sharma can save Rs 11,400 tax via tax-free perks
The medical and transport allowances in Sharma’s pay are now taxable. If these are replaced by reimbursements for telephone expenses and food coupons, he stands to save more in tax.
Pune-based automobile engineer Vijay Sharma has a very tax-friendly salary structure. He has also utilised most of the deductions available to him. Therefore, there is very little scope to reduce tax further. Even so, Taxspanner says Sharma can save about Rs 11,400 if some taxable allowances in his pay are replaced with tax-free perks.
The medical and transport allowances in Sharma’s pay are now taxable. If these are replaced by reimbursements for telephone expenses (Rs 1,000 per month).
Income from employer
Income from other sources
Next, Sharma should rejig his investments in fixed income options. He has fixed deposits of almost Rs 1.5 lakh, which earn him roughly Rs 12,000 a year. Sharma should consider shifting his money to debt mutual funds. Interest from fixed deposits is fully taxable as income every year while the gains from debt funds are taxed only at the time of redemption. What’s more, if the holding period exceeds three years, the tax is only 20% after indexation benefit.
Sharma is the sole breadwinner in the family. He should also take an insurance cover of Rs 1 crore. Sharma’s company offers him the NPS benefit and he also invests in the scheme on his own. At 35, he should opt for an aggressive allocation which puts 75% of the corpus in equity funds.
Vijay Sharma’s tax
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