Delhi-based Sachdeva can halve tax outgo by revamping pay structure, buying medical insurance

Delhi-based Deeepak Sachdeva’s tax is barely 5% of his total income. Even so, there is scope to reduce it by half. Taxspanner estimates that Sachdeva can reduce his tax by over Rs 28,000 if he rejigs his pay structure, invests more in the NPS and buys medical insurance for his family. Sachdeva should start by asking his employer to reduce his special allowance and instead give him tax free allowances.

The transport allowance of Rs 19,200 per year does not even require submission of bills. If he gets Rs 26,000 in tax-free allowances, his tax reduces by about Rs 6,500. He should also ask his company to put 10% of his basic pay in the NPS under Sec 80CCD(2d). If Rs 34,000 is put in the NPS, his tax will reduce by almost Rs 7,000. Another Rs 10,300 can be saved if he invests Rs 50,000 in the NPS under Sec 80CCD(1b). But this will reduce his take home considerably and lock up the investment till he retires. Sachdeva has no health cover. If he buys a health policy for his family, a premium of Rs 18,000 will reduce his tax by about Rs 3,700. He should also rejig his tax-saving investments. Instead of PPF, he should invest in the Sukanya Samriddhi Yojana and take exposure to stocks through ELSS funds.


(By Sudhir Kaushik of Taxspanner.com )