Tax saving tips: How you can reduce tax burden under the new regime TaxSpanner estimates suggest Mohindra can reduce his tax by almost Rs.25,000 if his company offers him the NPS benefit
Ludhiana-based finance professional Ratul Mohindra pays a high tax even though his salary is fairly tax-friendly. Mohindra wants to opt for the new tax regime. TaxSpanner estimates that Mohindra can reduce his tax by almost Rs.25,000 if his company offers him the NPS benefit.#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;}
Mohindra has chosen the new regime because he can’t claim too many deductions and exemptions. As he lives in his own house, the house rent allowance is fully taxable. Under the new regime, there are very few exemptions and deductions. Even so, he can reduce his tax by asking his company for the NPS benefit. Under Section 80CCD(2), up to 10% of the employee’s basic salary put in the pension scheme is tax-free. This limit is higher at 14% of the basic under the new regime opted by Mohindra. If his company puts Rs.7,943 (14% of his basic salary) in the NPS on his behalf every month, his annual tax will reduce by about Rs.24,500.
If his company agrees to change the pay structure, Mohindra should get some taxable perks in his salary replaced with tax-free reimbursements. The conveyance and fuel reimbursement of Rs.96,000 (Rs.8,000 a month), communication allowance of Rs.12,000 (Rs.1,000 per month), LTA of Rs.28,000 and professional development allowance of Rs.28,000 will be tax-free against bills. Newspaper allowance of Rs.12,000 (Rs.1,000 per month) and food coupons worth Rs.26,400 (Rs.2,200 per month) can also be added. The Rs.25,000 medical insurance premium he pays can also be claimed as a deduction.
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Under Section 80CCD(2), a monthly contribution of Rs.5,673 (10% of his basic salary) to the NPS will reduce his tax by about Rs.21,000. Another Rs.15,600 can be saved if he invests Rs.50,000 in the pension scheme on his own.
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#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
