He can also enhance his family’s medical cover and save on tax. Ghosh should start by asking his company for the NPS benefit. Under Section 80CCD(2d), up to 10% of the basic salary put in NPS is deductible. If his company puts Rs 6,214 in the NPS on his behalf every month, his annual tax will reduce by more than Rs 23,000. But this will also reduce his take-home by about Rs 4,200.
More tax can be saved if Ghosh invests in the NPS on his own under Sec 80CCD(1b). Up to Rs 50,000 invested can be claimed as a deduction. If he puts Rs 50,000 in NPS, Ghosh’s tax will be cut by Rs 15,600. He is 40 but averse to taking risk, so Ghosh should divide the corpus equally between equity funds, corporate debt funds and gilt funds.
Ghosh also needs to rejig his tax planning. Right now, he is paying a huge premium for low-yield insurance plans. He should close down the plans he bought in recent years and instead buy a term insurance cover of Rs 1 crore. At his age, a cover of Rs 1 crore will cost him about Rs 15,000 a year. He should also enhance his family’s medical insurance. If the premium is Rs 20,000 a year, he will save Rs 1,200 in tax. Ghosh should also shift from fixed deposits to debt funds for greater tax efficiency.
Income from employer
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