Tax-saving tips: HRA tax-free after rent to parent; how to reduce tax outgo by Rs 83,264 Sudhir Kaushik of TaxSpanner.com tells readers how they can optimise their tax by rejigging their incomes and investments
Kolkata-based marketing professional Sourav Gupta earns well, but pays a high tax because his salary structure is not very tax-friendly and he doesn’t claim all the deductions available to him. TaxSpanner estimates that Gupta can reduce his tax by more than Rs.83,000 if he claims HRA exemption by paying rent to his father, if his company offers him the NPS benefit, and he invests more in the scheme on his own. He also needs to buy health insurance for his family and senior citizen parents.
Gupta lives with his parents in their house and, therefore, does not claim exemption for HRA. If he pays Rs.25,000 rent to his father every month, the entire Rs.2.39 lakh HRA in his salary package can be tax-free, bringing down his tax by almost Rs.50,000. The Rs.3 lakh rent received by his father will be taxed after 30% standard deduction, but since his father has no other income, there will be no tax.
Next, Gupta should ask his company for the NPS benefit. Under Section 80CCD(2), up to 10% of the basic put in the NPS is tax-free. If his company puts Rs.3,315 (10% of his basic pay) in the NPS every month, his annual tax will reduce by about Rs.8,000. Another Rs.10,400 can be saved if he invests Rs.50,000 in the NPS on his own. The tax saving should be used to buy medical insurance for his family and his senior citizen parents. A premium of Rs.40,000 will cut his tax by roughly Rs.8,300
Gupta should also ask his company to rejig the salary structure by including some tax-free perks. Newspaper allowance of Rs.9,000 (Rs.750 per month) and food coupons worth Rs.22,000 (Rs.1,833 per month) will reduce his tax by around Rs.6,500.
In 2023-24, Gupta opted for the new tax regime. He should stay with the old tax regime since his tax will be lower.
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.
(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
