Mumbai-based Arampalli can cut tax by rejigging pay structure, putting more in NPS

Mumbai-based Priya Arampalli pays barely 6% of her gross income in tax, but there is cope to reduce it further. Taxspanner estimates that if her pay structure is rejigged and she puts more into NPS, her tax outgo can come down by almost Rs 28,000. However, like many other companies, her employer does not offer the flexibility of tweaking the pay structure.

Even so, Arampalli should ask for a reduction in the special allowance. Instead, the company should put 10% of her basic pay in the NPS under Sec 80CCD(2d). If Rs 49,800 is put in the NPS, her tax will reduce by about Rs 10,250. But this will reduce her take home pay.

Next, Arampalli should make changes in her tax planning investments. She should reduce the PPF investment to Rs 1 lakh and put the balance Rs 50,000 in the NPS under Sec 80CCD(1b). This will cut her tax by Rs 10,300. Given that she has no equity exposure, she can also consider replacing the PPF with an ELSS fund.

Arampalli should also buy a health insurance cover for herself and her senior citizen parents. A policy that costs Rs 36,000 a year will reduce her tax by about Rs 7,400.

(By Sudhir Kaushik of Taxspanner.com)