Tax optimiser: Despite not having HRA component, Sharma can save tax by claiming exemption on rent paid

By Sudhir Kaushik of Taxspanner.com

Bengaluru-based IT professional Aryan Sharma works for a startup and gets a lumpsum salary without too many components. The only perk he gets are food coupons worth Rs 1,800 per month. Taxspanner estimates that Sharma can reduce his tax by nearly Rs 60,000 if he gets some tax-free perks, his company offers the NPS benefit and he also invests in the pension scheme on his own.

Income from employer

Income from other sources

Sharma should start by asking his company for reimbursements of expenses on telephone, newspaper and gadgets. If he gets a telephone allowance of Rs 1,000, newspaper allowance of Rs 1,000 and gadget allowance of Rs 5,000 per month, his annual tax will reduce by almost Rs 17,500.


Next, he should ask for the NPS benefit. Under Sec 80CCD (2), up to 10% of the basic put in NPS is tax free. If his company puts Rs 6,833 (10% of his basic) in the NPS every month, his annual tax will reduce by almost Rs 17,000. Another Rs 10,400 can be saved if he invests Rs 50,000 in the NPS on his own. At 29, Sharma should allocate the maximum 75% to equity funds of the NPS.

Tax-saving investments

Sharma lives on rent but doesn’t claim exemption because his salary does not have an HRA component. Taxspanner says that he can claim exemption for Rs 5,000 rent per month (Rs 60,000 in a year) under Section 80GG. This will reduce his annual tax by about Rs 12,500.

Sharma has bought a health insurance plan for himself and his parents. This should be enhanced for better coverage. A higher health insurance premium of Rs 25,000 will reduce his tax by about Rs 1,500.

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