Never miss a great news story!
Get instant notifications from Economic Times
AllowNot now


You can switch off notifications anytime using browser settings.
10,835.155.8
Stock Analysis, IPO, Mutual Funds, Bonds & More

Tax optimiser: Why salaried Kumar needs more perks in his salary to cut tax

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

ET CONTRIBUTORS|
Jul 15, 2019, 06.30 AM IST
0Comments
Getty Images
tax7-getty
More tax can be saved if Kumar shifts from tax unfriendly fixed deposits to more tax efficient debt mutual funds.
By Sudhir Kaushik of Taxspanner.com

Gurgaon-based bank manager Dinesh Kumar pays a high tax because his salary is not very tax friendly. Taxspanner estimates that Kumar can save more than Rs 78,000 in tax if his pay structure is rejigged to include tax-free perks, he claims the full NPS benefit offered by his company and he invests more in the pension scheme on his own.

Kumar should start by asking his company for some basic reimbursements such as fuel and travelling expenses (Rs 5,000 a month), newspaper bills (Rs 1,000 a month), telephone expenses (Rs 1,500 a month) and LTA (Rs 75,000 annually).

These perks are tax free against submission of bills and actual usage. But there is a problem. “I have a sedantary job and rarely go on holidays. These perks may not be feasible for me,” he says. Even so, these perks can save him roughly Rs 51,500 in tax.

Income from employer
income-from-employer

Next, he should increase his contribution to NPS under Section 80CCD(2). Up to 10% of the basic salary put in NPS is tax free. Kumar puts only Rs 5,000 a month. If he raises this to Rs 7,500 (10% of his basic) a month, it will cut his annual tax by around Rs 9,500. Another Rs 15,600 can be saved if he invests Rs 50,000 in NPS on his own.

Tax-saving investments and other deductions
tax-saving

Dinesh Kumar’s tax
tax-saved


At 45, Kumar should opt for a balanced allocation which divides the corpus between equity, gilt and corporate debt funds.

More tax can be saved if Kumar shifts from tax unfriendly fixed deposits to more tax efficient debt mutual funds.

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.)
0Comments

Also Read

TDS on salary: How it is calculated and deducted

Salary hikes for Ram Lalla, temple staff

Released salary payment for July: BSNL Chief

Metro cities to witness double-digit salary growth

Comments
Add Your Comments
Commenting feature is disabled in your country/region.
Download The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.

Other useful Links


Follow us on


Download et app


Copyright © 2019 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service