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Tax optimiser: Investing in debt mutual funds can help Shukla cut tax by Rs 83,000

ET Wealth tells readers how they can optimise their tax by rejigging their income and investments.

Sep 09, 2019, 06.30 AM IST
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Besides these changes, Shukla can save a lot of tax by shifting from bank deposits to debt funds.
By Sudhir Kaushik of

Delhi-based marketing professional Sanjeev Shukla does not pay a very high tax, but it can be reduced further.

Taxspanner estimates that Shukla can save more than Rs 1.3 lakh in tax if he shifts from fixed deposits to debt funds, his company offers him a few tax-free perks and the NPS benefit and he invests in the scheme on his own.

Income from employer and Income from other sources

Shukla should start by asking his company for the NPS benefit. Under Section 80CCD(2), up to 10% of the basic salary put in the scheme is tax free. If his company puts Rs 4,600 (10% of his basic salary) in the NPS every month, it will cut his annual tax by around Rs 11,500. Another Rs 10,400 can be saved if he invests Rs 50,000 in NPS on his own. At 33, Shukla should opt for an aggressive allocation with the maximum 75% in equity funds.


Next, he should ask for reimbursements of telephone bills (Rs 1,500 a month) and books and periodicals (Rs 1,000 a month) and food coupons (Rs 1,833 a month). This will save him about Rs 10,800 in tax. If he also gets LTA of Rs 50,000 a year, another Rs 10,400 will be saved.


Besides these changes, Shukla can save a lot of tax by shifting from bank deposits to debt funds. He pays more than Rs 80,000 tax on the Rs 3 lakh interest from bank deposits. Unlike interest income, which is taxed every year, gains from debt funds are taxed only at the time of withdrawal. What’s more, they are taxed at a lower rate of 20% with indexation benefit if held for more than three years.

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Paying too much tax? Write to us at 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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