Tax optimiser: How salary rejig can help Jha save Rs 90,000 in tax

Delhi-based marketing manager Pawan Jha pays a high tax because his salary structure is not very tax friendly. Taxspanner estimates that Jha can reduce his tax by almost Rs.90,000 if his employer offers him certain tax free emoluments. Jha also needs to rejig his investments and buy medical insurance for himself and his parents. Jha should start by asking his company for some basic tax-free components such as a newspaper allowance and reimbursements of telephone bills. If he gets Rs.750 for newspapers and Rs.1,500 for telephone and internet per month, his annual tax will reduce by around Rs.8,500. Meal coupons worth Rs.22,000 will cut Rs.6,864 in tax. An LTA of Rs.60,000 will reduce tax further by almost Rs.19,000.

Jha has opted for the NPS benefit offered by his company but doesn’t fully utilise the 10% contribution limit that is eligible for deduction. If he raises the monthly contribution by Rs.1,280, he can save almost Rs.5,000 in tax. Another Rs.15,600 can be saved if he invests Rs.50,000 in the scheme on his own. He can do this by reducing ELSS investment to Rs.70,000.

Next, Jha should ask his company to offer him a gadget allowance under Section 17(2). Gadgets and other items can be bought in the name of the company and given to an employee for personal use. The employee is taxed for 10% of the value of such assets provided by the company for personal use. If Jha gets Rs.60,000 a year, his annual tax will reduce by around Rs.17,000.

A bachelor, Jha has not bought medical insurance as he is covered by the group insurance from his company. But this may not be sufficient. He should buy health insurance for himself and his parents. A premium of Rs.50,000 will reduce his tax by Rs.15,600. Tax-saving investments

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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.