Swapnil Narkhede earns well, but pays a very high tax because his salary structure is not very tax friendly. Taxspanner estimates that the Mumbai-based engineer can cut his tax by nearly Rs 45,000 if he puts more into the NPS and buys health insurance for his family.
Narkhede should ask his employer to put 10% of his basic pay in the NPS under Section 80CCD(2d). If Rs 98,400 is put in the NPS every year, his tax will reduce by Rs 27,000. But this will reduce his take-home pay by almost Rs 5,900 per month. The NPS can reduce his tax further if Narkhede puts Rs 50,000 in the NPS under Section 80CCD(1b). This will cut his tax by another Rs 10,300. Save tax beyond 80C, Optimize Tax Now!
Narkhede is young and should therefore opt for the aggressive lifecycle fund of the NPS which allocates 75% to equities till the age of 35. The exposure to equity comes down by 2% every year. Narkhedebs employer offer him group medical cover but he should buy on his own as well. A floater cover of Rs 5-6 lakh will cost around Rs 15,000 and will cut his tax by about Rs 3,000. He can also avoid the Rs 4,635 tax on the interest from fixed deposits by switching to debt funds.
INCOME FROM EMPLOYER
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(As Published in ET Wealth on Oct 17, 2016)