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Tax optimiser: Salaried Kumar can save over Rs 68,000 in tax via NPS, perks

By Sudhir Kaushik of

Mumbai-based IT professional Rohan Kumar pays a high tax because his pay structure is not tax friendly and he doesn’t utilise all the deductions available to him. Taxspanner estimates that Kumar can reduce his tax by more than Rs 68,000 if he gets a few tax free perks and the NPS benefit under Section 80CCD(2) and he invests more in NPS on his own.

Income from employer


Income from other sources


Kumar should start by asking his company to offer him the NPS benefit. Under Section 80CCD(2), up to 10% of the basic salary put in NPS is tax deductible. If his company puts Rs 5,837 (10% of his basic salary) in NPS every month, his tax will reduce by almost Rs 22,000. Another Rs 15,600 can be saved if he invests Rs 50,000 in the scheme on his own under Sec 80CCD(1b). At 33, Kumar should opt for an aggressive allocation that puts the maximum 75% of the corpus to equity funds.

Tax-saving investments


Other deductions


Next, he should ask his company to offer a few tax-free perks. He can get food coupons (Rs 1,833 per month) and leave travel allowance (LTA). LTA is tax free if claimed once in a block of two years. If he gets an LTA of Rs 60,000 per year, it will reduce his tax by almost RS 19,000. The food coupons will cut tax by Rs 7,000.

Rohan Kumar’s tax


Kumar relies solely on the group medical cover for himself and his family. Group covers are useful but do not cover the family if the employee leaves the job. Kumar should buy a medical insurance plan for himself and his family. A premium of Rs 15,000 will reduce his tax by roughly Rs 4,700.

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.
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