Shifting to new tax regime could save Hyderabad techie Rs.62,000 in tax He will also get a higher deduction for NPS contributions through his employer. Sudhir Kaushik of TaxSpanner.com tells readers how they can optimise their tax by rejigging their incomes and investments
Hyderabad-based software professional Naveen Bhanot earns well, but also pays a high tax because he is unable to avail of all the deductions and exemptions available to him. TaxSpanner estimates that Bhanot can save about Rs.62,000 in tax if he opts for the new tax regime and increases the contribution to the NPS through his employer.#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;}
Bhanot wants to shift to the new regime this year. Under this, he will not get a deduction for home loan interest because it’s available only for let-out properties. He will also not get deduction for the tax savings under Sec 80C or medical insurance under Section 80D.
However, he will get a higher basic exemption of Rs.3 lakh (Rs.2.5 lakh in old regime) and standard deduction of Rs.75,000 (Rs.50,000 in old regime). He will also get a higher deduction for NPS contributions through his employer. Under Section 80CCD(2), up to 14% of the employee’s basic salary put in the pension scheme is tax-free. If he asks his company to increase the monthly contribution to Rs.13,305 (14% of his basic salary), his annual tax will reduce by about Rs.28,500.
Many of the tax-free perks in Bhanot’s salary (fuel and car maintenance, driver’s salary, LTA) get taxed because he is unable to claim exemption. These should be replaced with other tax-free perks. If he gets food coupons worth Rs.26,400 (Rs.2,200 per month) and newspaper allowance of Rs.12,000 (Rs.1,000 per month), he will save Rs.12,000 in tax. 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. Gadget allowance of Rs.60,000 (Rs.5,000 per month) will reduce Bhanot’s tax by nearly Rs.19,000.
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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.
#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;} (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
