Almost 16% of Nirmal Kumar's total income goes into tax because his company does not offer too many tax-free perks. Taxspanner estimates that Kumar can save more than Rs 75,000 in tax if his company rejigs the pay package to give him taxfree perks and the NPS benefit. He also needs to invest in the pension scheme on his own.
Many of the taxable allowances in Kumar's pay structure should be replaced with tax-free perks. He gets a taxable holiday allowance, even though leave travel assistance (LTA) is tax free twice in a block of four years. An LTA of Rs 75,000 can reduce his tax by over Rs 23,000. Kumar should also ask for reimbursements of his telephone and newspaper bills as well as food coupons. If he gets Rs 60,000 under these heads, his tax comes down by Rs 18,500.
Income from employer
He can save more if he gets the NPS benefit. Up to 10% of the basic salary put in the NPS is tax free under Sec 80CCD(2d). If his company puts Rs 58,749 in NPS, his tax will reduce by about Rs 18,150. Another Rs 15,450 can be saved if he invests Rs 50,000 in NPS on his own under Sec 80CCD(1b). At 46, Kumar should opt for a balanced allocation.
Nirmal kumar's tax
Kumar also needs to rejig his tax planning. He should avoid tax-inefficient NSCs and FDs to save tax. Also, PPF rates are down so he should consider investing in ELSS funds instead.
Write to us for help
Paying too much tax? Write to us at etwealth@ timesgroup.com with 'Optimise my tax' as the subject. Our experts will tell you how to reduce your tax by rejigging your pay and investments.
Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.
