Kolkata-based finance professional Chiranjoy Dutta earns well, but also pays a high tax because his salary is not tax-friendly and he doesn’t claim all the deductions available to him. TaxSpanner estimates that Dutta can reduce his tax by over Rs.1 lakh if his salary includes some tax-free allowances, and he opts for the NPS benefit offered by his company, besides investing in the pension scheme on his own. Dutta has stayed away from the NPS because he doesn’t know about the tax benefits that the scheme offers. Under Section 80CCD(2), up to 10% of basic salary put in the NPS is tax deductible.
If his company puts Rs. 7,500 (10% of his basic pay) in the NPS every month, Dutta can save about Rs. 28,000 in tax. Another Rs.15,600 can be saved if he invests Rs.50,000 in the scheme on his own under Section 80CCD(1b). At 31, Dutta should put the maximum 75% in equity funds of the NPS. He should also ask his company for common tax-free perks, such as LTA, reimbursement of newspaper bills and meal coupons. If he gets an LTA of Rs.1,500 a month) will cut his tax by Rs.12,500. Some companies also offer gadget allowance to employees. Under Section 17(2), gadgets given to an employee for personal use are taxed at only 10% of the value. Gadget allowance of Rs.60,000 will cut Dutta’s tax by Rs.18,720. More tax can be saved if he buys health insurance for his parents.
Source By: economictimes
