Gahlaut can save Rs 1.8 lakh tax by switching to new tax regime

Hyderabad-based data scientist Raghav Gahlaut is paying a high tax because his salary structure is not tax-friendly and he doesn’t claim all deductions available to him.

Gahlaut has opted to stay in the old tax regime because he gets tax-free perks, has a big home loan, and puts money in tax-saving investments. “I know I could have saved more tax by investing in the NPS, but there is no surplus after my big home loan EMI of Rs.83,000,” he says.

Even without the NPS investment, he will pay a marginally lower tax if he switches to the new tax regime. His tax outgo will reduce by Rs.1,16,240.


More tax can be saved if Gahlaut asks his employer to offer him the NPS benefit under Section 80CCD(2). NPS benefit does not add to wage cost or paperwork for the company, but it lowers the tax outgo for employees significantly.

If the company puts 14% of the basic salary in the NPS, Gahlaut will save Rs.65,520 more under the new tax regime. Gahlaut and his family are covered by group health insurance from the company, but he has bought a cover on his own as well. He will not get tax deduction for the medical insurance premium under the new regime, but he should not stop it.

If he wishes to stay in the old tax regime this year, he should reduce the special allowance component by Rs.2,10,000, stop ELSS SIPs, reduce contribution to the PPF to Rs.1,000 a year, and invest in the corporate NPS instead. He should also switch from fixed deposits to debt funds to lower the tax outgo.

The old regime is marginally better for Gahlaut this year. However, the new tax regime is better for him from next year onwards as he stands to save Rs.1,81,740 under the new regime.

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