Noida-based finance professional Saurabh Sharma pays a low tax even though he does not claim all the deductions available to him. His pay was cut last year due to covid and he does not have enough to spare for tax saving investments. “Will my tax come down if I opt for the new tax regime,” he asks.
Taxspanner estimates that although Sharma is not availing deductions, he will not benefit under the new tax regime. In fact, his tax will rise almost 80%to Rs 34,000 under the new regime.
Income from employer
Taxspanner says Sharma can reduce his tax to zero if he brings down his taxable income to less than Rs 5 lakh. This can be done by rejigging the pay structure and claiming full tax deduction under Section 80C.
Income from other sources
Sharma should start by asking for tax-free perks such as newspaper allowance and food coupons. If he gets food coupons worth Rs 22,000 and newspaper allowance of Rs 5,000, his taxable income will reduce by almost Rs 27,000.
After the pay cut last year, Sharma does not have enough for tax saving investments. However, he should utilise the full deduction under Sec 80C to reduce his taxable income further. He should try and reduce expenses and save as much as possible.
Tax Saving Investments
He should consider liquidating his fixed deposits and other investments for this purpose. If he manages to invest Rs 48,000 more under Sec 80C and another Rs 20,000 in the NPS, his taxable salary will be less than Rs 5 lakh, making him eligible for rebate under Sec 87A. At 31, Sharma should allocate the maxi mum to equity funds of the NPS
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.
