Bengaluru-based media professional Ashish Rastogi pays a low tax because he avails of all the tax deductions available to him. Even so, Taxspanner estimates that Rastogi can reduce his tax by more than Rs 40,000 if his company offers him some tax-free perks and the NPS benefit and he buys health insurance for his parents.
Income from employer
Income from other source
Rastogi should start by asking his company for some tax-free perks such as reimbursements of conveyance expenses, newspaper bills and food coupons. If he gets a conveyance allowance of Rs 30,000 (Rs 2,500 per month), newspaper allowance of Rs 6,000 (Rs 500 per month) and food coupons worth Rs 22,000 (Rs 1,833 per month), his tax will reduce by around Rs 12,000. Another Rs 10,400 can be saved if he gets a gadget allowance of Rs 50,000. Under Section 17(2), the employee is taxed for 10% of the value of the asset.
Tax-saving investments
Rastogi should also ask his company for the NPS benefit. Under Sec 80CCD(2), up to 10% of the basic put in NPS is tax free. If his company puts Rs 3,781 (10% of his basic pay) in the NPS every month, his annual tax will reduce by more than Rs 9,000.
Though covered by group health insurance, Rastogi has separately bought medical insurance for himself and his family. He should also buy health insurance for his senior citizen parents. A premium of Rs 40,000 will cut his tax by Rs 8,000.
Rastogi also needs to make some changes in his tax planning. Instead of tax inefficient and low yield fixed deposits, he should opt for ELSS and enjoy tax free returns.
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.
