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

    Synopsis

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

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

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