Bengaluru-based IT professional Anumod Sharma has a fairly tax friendly salary structure but he does not avail of all the deductions available to him, which has pushed up his tax liability. Taxspanner estimates that Sharma can reduce his tax by nearly Rs 52,000 if he avails of the NPS benefit offered by his company and he invests more in the pension scheme on his own.Sharma should start by opting for the NPS benefit offered by his company. Under Section 80CCD(2), up to 10% of the basic salary put in NPS is tax free. If his company puts Rs 4,531 (10% of his basic) in the NPS every month, it will reduce his tax by nearly Rs 17,000. Another Rs 15,600 can be saved if he invests Rs 50,000 in the NPS on his own. At 33, Sharma should opt for an aggressive allocation with the maximum 75% in equity funds.
I don’t have enough surplus to invest in the NPS.says Anumod Sharma
This can be resolved by reducing the contribution in PPF from Rs 1.5 lakh to Rs 50,000.
Next, he should ask his company to include some tax free allowances in his paycheque. If he gets Rs 12,000 (Rs 1,000 a month) for newspapers and books, Rs 12,000 (Rs 1,000 a month) for furnishings and meal coupons worth Rs 12,000 (Rs 1,000 a month), his annual tax will come down by about Rs 11,000.
More tax can be saved if he buys medical insurance for himself and his wife. Though Sharma and his wife are covered by the group medical insurance offered by his company, these plans don’t work when a person leaves a job or is laid off. If he pays Rs 25,000 premium for a health plan, his income tax will come down by around Rs 6,500.
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