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Tax optimiser: How Shah can cut tax by Rs 42,000 via tax-free perks, NPS

Anju Shah could save over Rs 42,000 in tax if she opts for tax-free allowance and the NPS benefit offered by her company. Here's how.

Jun 10, 2019, 06.30 AM IST
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Taxpayers can optimise their tax by rejigging their income and investments.
By Sudhir Kaushik of

Pune-based finance professional Anju Shah has just joined a new company that allows her to structure her compensation package.

Taxspanner estimates that Shah could save over Rs 42,000 in tax if she opts for tax-free allowance and the NPS benefit offered by her company. She also needs to invest in the NPS on her own and buy medical insurance for her family.

Shah should pick LTA, and reimbursement of phone and newspaper bills from among the bouquet of benefits offered to her. Reimbursements of telephone bills (Rs 750 a month), books and periodicals (Rs 500 a month) and LTA (Rs 60,000 a year) will save her roughly Rs 18,000 in tax.

Next, she should opt for the NPS benefit offered by her company under Section 80CCD(2). Up to 10% of the basic salary in the NPS is taxfree. If her company puts Rs 4,132 (10% of basic) in the NPS every month, her tax will be reduced by around Rs 10,300. Another Rs 10,400 can be saved if she invests Rs 50,000 in the NPS on her own.

Income from employer


Anju Shah’s tax

At 28, Shah should opt for an aggressive allocation with the maximum 75% in equity funds. Shah relies on the group health cover from her husband’s company. Group health covers are useful, but end when a person changes jobs or retires. Shah should buy a separate health insurance for the family. A premium of Rs 16,000 will cut her tax by Rs 3,300.

Some more tax savings are possible if she switches from fixed deposits to debt funds.

Write to us for help
Paying too much tax? Write to us at etwealth@ 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

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