Bengaluru-based software professional Arvind Jasuja has a high income, but also pays a high tax because his salary is not very tax efficient. TaxSpanner estimates that Jasuja can save more than Rs.1.35 lakh in tax if his pay structure is rejigged to include tax free perks, his employer offers him the NPS benefit and he manages his investments better to avoid capital gains tax.

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Jasuja should start by asking for some tax-free perks in addition to the communication allowance and meal coupons he currently enjoys. A conveyance and fuel reimbursement of Rs.60,000 (Rs.5,000 per month) and a books and newspaper allowance of Rs.12,000 ( Rs.1,000 per month) will reduce his tax by roughly Rs.22,500. An LTA of Rs.60,000 will shave off another Rs.18,700 from his tax outgo.

Next, Jasuja should explore the possibility of a gadget allowance. Under Section 17(2), gadgets and appliances bought in the name of the company and given to the employee for personal use are taxed at 10% of their value. If Jasuja buys items worth Rs.1.2 lakh in a year ( Rs.10,000 per month), his tax can reduce by around Rs.37,500. There is no need for paperwork because employee benefit solutions such as Zaggle Save can manage these perks digitally.

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Jasuja has not opted for the NPS benefit from his employer even though he does invest in the pension scheme on his own. Big tax savings are possible if he opts for the NPS benefit from his company. Under Section 80CCD(2), up to 10% of the employee’s basic salary put in the pension scheme is tax-free. If his company puts Rs.11,667 (10% of his basic salary) in the NPS on his behalf every month, his annual tax will reduce by nearly Rs.43,700.

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.