Tax optimiser: How salaried Manjunath can save Rs 70,000 tax via perks, LTA

By Sudhir Kaushik of Taxspanner.com

G Manjunath’s tax outgo is moderate but he can reduce it further if he utilises the full deduction available under Sec 80C and his employer offers him some basic reimbursements and perks that are exempt from tax. Taxspanner estimates that Manjunath can reduce his tax by over Rs 70,000 if he also gets the NPS benefit from his company, invests in the scheme on his own and buys medical cover for his family.

Manjunath’s pay structure does not have too many perks. If his company offers him a nominal Rs 533 a month for telephone bills, Rs 400 a month for newspapers and magazines, Rs 1,500 a month for fuel and conveyance and Rs 1,500 worth of food coupons, his tax will reduce by roughly Rs 15,000. Another Rs 15,000 will be saved if he gets LTA of Rs 48,000. These are tax free against submission of bills and actual usage.


Income from employer

Income from other sources

Tax-saving investments

Other deductions

Manjunath’s tax

Till last year, the principal repayment of Manjunath’s home loan used to take care of his Sec 80C deduction. “Now the home loan is fully paid off, I need to invest more to save tax,” he says. If he invests Rs 51,000 under Sec 80C, his tax will reduce by Rs 10,400.

The other big cut in tax can come from investing in the NPS. Under Sec 80CCD(2), up to 10% of the basic salary put in NPS is deductible. If Manjunath’s company puts Rs 5,400 (10% of his basic pay) in the NPS on his behalf every month, his tax will reduce by about Rs 13,500. Another Rs 10,400 can be saved if he invests Rs 50,000 in the NPS on his own under Sec 80CCD(1b). At 39, Manjunath should put the maximum 75% in equity funds.

Write to us for help
Paying too much tax? Write to us at etwealth@ timesgroup.com with ‘Optimise my tax’ as the subject. Our experts will tell you how to reduce your tax by rejigging your pay and investments.