Rent to mom, NPS cut income tax by Rs 86,000; know how Use HRA exemption; NPS benefits offered by company, LTA and medical insurance to reduce income tax outgo. Sudhir Kaushik of TaxSpanner.com tells readers how they can optimise their tax by rejigging their income and investments
Vijayawada-based engineer Mahesh Babu Pagolu pays a moderate tax because his salary structure is quite tax-friendly. However, he can bring down the tax outgo significantly by claiming all the deductions available to him. TaxSpanner estimates that Pagolu can reduce his tax by nearly Rs.86,000 if he pays rent to his mother and claims HRA exemption, if his company offers him the NPS benefit, and if he invests in the pension scheme on his own. He should also ask for some tax-free allowances like LTA and buy medical insurance for his family.
Pagolu lives with his mother in her house. If he pays her a monthly rent of Rs.25,000, he can claim exemption for Rs.2.54 lakh that he gets as HRA. This will help him save Rs.53,000 in tax. His mother does not have any income, so the Rs.3 lakh annual rent received from her son won’t lead to any tax liability. Next, he should ask his company for the NPS benefit. Under Section 80CCD(2), up to 10% of basic salary put in the NPS is tax-deductible. If his company puts Rs.4,232 (10% of his basic pay) in the NPS every month, Pagolu can save about Rs.10,600 in tax. Another Rs.10,400 can be saved if he invests Rs.50,000 in the scheme on his own under Section 80CCD(1b). At 35, Pagolu should put the maximum 75% in equity funds of the NPS. Pagolu already gets some tax-free perks such as telephone allowance and meal coupons. If he also gets an LTA of Rs.50,000, his tax will reduce by Rs.10,400. More tax can be saved if he buys health insurance for his family and mother.
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.
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(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
This story originally appeared on: India Times - Author:Faqs of Insurances
