Pune-based marketing professional Damayanti Datta pays a low tax because her salary structure is quite tax-friendly. Taxspanner estimates that Datta can reduce her tax further by more than Rs 81,000 if she pays rent to her mother, gets a few more tax-free perks and her company offers her the NPS benefit.
Datta lives with her widowed mother in her house and therefore, does not claim exemption for HRA. If she pays Rs 27,000 rent to her mother every month, the entire Rs 2.64 lakh HRA can be tax-free. That alone will cut her tax by almost Rs 55,000. However, the Rs 3.24 lakh rent received by her mother will be taxed after 30% standard deduction. But since her mother’s total income is not very high, the rent will not lead to a tax burden.
Income from employer
Next, Datta should ask her company for some tax-free perks such as reimbursements of newspaper bills and food coupons. If she gets a newspaper allowance of Rs 6,000 (Rs 500 per month) and food coupons worth Rs 22,000 (Rs 1,833 per month), her tax will reduce by Rs 5,800.
Tax-saving investments
Datta should also ask her company for the NPS benefit. Under Sec 80CCD(2), up to 10% of the basic put in NPS is tax free. If her company puts Rs 4,400 (10% of her basic pay) in the NPS every month, her annual tax will reduce by almost Rs 11,000. Another Rs 10,400 can be saved if she invests Rs 50,000 in NPS on her own.
Damayanti Datta’s tax
Lastly, Datta should buy medical insurance for herself and her mother. A premium of Rs 25,000 will reduce her tax by Rs 5,200.
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.
