How old income tax regime can help save Rs 52,000 tax Several deductions available to you will not be considered under the new regime. Sudhir Kaushik of TaxSpanner.com tells readers how they can optimise their tax by rejigging their incomes and investments
Noida-based IT professional Sanjay Tomar pays a high tax even though his pay structure is tax-friendly. Tomar did not inform his company whether he wanted to opt for the old or new tax regime, and was placed under the new regime by default. Tomar didn’t get it changed because of the ease it offered. “The new tax regime doesn’t require me to make any tax-saving investments or provide proof of rent payments,” he says. TaxSpanner estimates that Tomar can save more than Rs.52,000 in tax if he stays with the old tax regime, opts for the NPS benefit offered by his company, and invests in the pension scheme on his own as well.
As a first step, Tomar should inform his company that he wants to opt for the old tax regime. Several deductions available to him will not be considered under the new regime. He lives in a rented house, is repaying an education loan, has bought medical insurance for himself and his mother, and can invest more under Section 80C. These will not be eligible for deduction in the new tax regime. If he claims the full Rs.1.5 lakh deduction under Section 80C, his tax will reduce by about Rs.30,000.
Next, he should opt for the NPS benefit from his employer. Under Section 80CCD(2), up to 10% of the basic salary put in the NPS on behalf of the employee is tax-free. If his company puts Rs.4,000 (10% of basic) in the NPS every month, his tax will reduce by almost Rs.10,000. Another Rs.10,400 can be saved if he invests Rs.50,000 in the NPS on his own under Section 80CCD(1b). At 26, Tomar should put the maximum 75% of the corpus in equity funds.
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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This story originally appeared on: India Times - Author:Faqs of Insurances
