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Tax Optimizer: NPS, LTA can help salaried Passi reduce tax outgo

Paying too much tax? Write to us and our experts will tell you how to reduce your tax by rejigging your pay and investments.

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Last Updated: Sep 04, 2017, 06.30 AM IST
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By Sudhir Kaushik, Taxspanner.com

Yogendra Passi does not have income from other sources but still pays a high tax. Taxspanner estimates that Passi can cut his tax by almost Rs 49,000 if his company offers him a few tax-free perks, he opts for the NPS benefit offered by his employer, and invests in the scheme on his own.

Passi should ask his company to offer him leave travel assistance (LTA). If he gets Rs 48,125 as LTA every year, his tax will reduce by almost Rs 15,000. Next, he should opt for the NPS benefit under which he can put 10% of his basic pay in the scheme under Sec 80CCD(2d). This will cut his tax by roughly Rs 18,000. However, this will bring down his takehome salary by almost Rs 5,000.

Another Rs 10,300 can be saved if he invests Rs 50,000 in the NPS under Sec 80CCD(1b) on his own. He is young, so Passi should opt for an aggressive asset allocation with the maximum 50% in equity funds. Passi does not have a health insurance plan of his own and depends solely on the group health cover offered by his company. He should buy a medical insurance plan of about Rs 5 lakh on his own as well. Health insurance premium is deductible under Sec 80D. If the premium is Rs 15,000, Passi’s tax will come down by around Rs 4,500.

INCOME FROM EMPLOYER (All figures are in Rs)
Tax Optimizer: NPS, LTA can help salaried Passi reduce tax outgo
Actions to take:
•Reduce the taxable portion of special allowance from the pay package.
•Leave travel allowance is a tax free on submission of actual bills.
•Up to 10% of basic salary put in NPS is tax deductible.

Tax Optimizer: NPS, LTA can help salaried Passi reduce tax outgo
• Invest in NPS under section 80 CCD (1b) as a new tax saving option.

Tax Optimizer: NPS, LTA can help salaried Passi reduce tax outgo
•Buy health insurance for self, spouse and parents.

Tax Optimizer: NPS, LTA can help salaried Passi reduce tax outgo

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 facts and opinions written in this column are those of the author and do not reflect the views of economictimes.com.
Click here for all the information and analysis you need for tax-saving this financial year
(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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