Sreenivasan is an avid investor and has utilised nearly all the tax-saving opportunities avaliable to him. Even so, Taxspanner estimates that he can bring down his tax by more than 40% if his employer offers him NPS benefit and he takes a home loan and buys medical insurance.
Sreenivasan should ask his company to reduce his special allowance by Rs 90,390 and put that amount in the NPS under Section 80CCD(2d). This will reduce his tax by about Rs 28,000. He should also buy medical insurance for his parents and his family. An annual premium of Rs 20,000 will cut his tax by Rs 6,200. Save tax beyond 80C, Optimize Tax Now!
Sreenivasan lives in a rented accommodation but is planning to buy a house with a loan. If he buys a ready to move in house, he can avail of the tax benefits on the loan right away. However, he will not gain much in real terms. His HRA will be taxable if he claims deduction on the home loan. If he gives the house on rent, he can claim the HRA exemption as well as the tax benefits on the home loan. Though the rent will be taxed (after 30% standard deduction), the entire interest paid on the home loan can be claimed as a deduction. This will save him roughly Rs 1.2 lakh in tax.
Income From Employer
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(As Published in ET Wealth on Jan 16, 2017)