How NPS, tax-free perks can reduce your tax outgo by Rs 1 lakh

Hyderabad-based technical writer Vipin Kukreja earns well, but a big chunk of his salary goes in tax. TaxSpanner estimates that Kukreja can reduce his tax outgo by more than Rs.1 lakh if his company offers him the NPS benefit and he gets some tax-free perks. Kukreja should start by checking whether his company offers the NPS benefit. Under Sec 80CCD(2), up to 10% of basic salary put in the NPS is tax-deductible, but Kukreja is not sure because he joined the company only recently.

If his company puts Rs.15,417 (10% of his basic pay) in the NPS every month, Kukreja’s annual tax will reduce by nearly Rs.58,000. At 33, Kukreja should opt for an aggressive allocation and put the maximum 75% in equity funds. Kukreja gets some basic perks like reimbursement of telephone, conveyance and newspaper bills. He should ask his company for some more tax-free perks, such as gadget allowance and meal coupons. Under Section 17(2), gadgets bought in the name of the company and given to the employee for personal use are taxed at only 10% of the value.

This perk became very important during the ‘work from home’ phase after the outbreak of Covid. If Kukreja buys items (computers, furniture, AC) worth Rs.1.2 lakh in a year, his tax will be reduced by almost Rs.34,000. Meal coupons worth Rs.26,000 in a year will reduce the tax further by roughly Rs.8,000. More tax can be avoided if he closes his fixed deposits and goes for debt funds instead.

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