Tax Optimiser: Kadam can cut tax outgo by Rs 67K via NPS, tax free perks

By Sudhir Kaushik

Anil Kadam pays a very high tax because his income structure is not tax friendly. Also, he is not able to avail tax exemption for the leave travel allowance.

Consequently, more than 14% of his income goes into tax. Taxspanner estimates that Kadam can reduce his tax by almost Rs 67,000 if his company offers him a few tax free perks and the NPS benefit and he invests more in the scheme on his own.


Kadam should start by asking for reimbursements of everyday expenses on telephone and newspapers. If he gets Rs 12,000 (Rs 1,000 per month) under each head, his annual tax will reduce by Rs 7,500.

Next, he should ask for the NPS benefit. Under Section 80CCD(2d), up to 10% of the basic salary put in NPS is deductible. If his company puts Rs 5,600 in the NPS on his behalf every month, his annual tax will reduce by about Rs 21,000. But this will also reduce his take-home pay by about Rs 3,900.

More tax can be saved if Kadam invests in the NPS on his own under Sec 80CCD(1b). Up to Rs 50,000 invested can be claimed as a deduction. If he puts Rs 50,000 in NPS, Kadam’s tax will be cut by Rs 15,600. At 40, Kadam should put the maximum in equity funds. Kadam does not have life insurance. As the sole breadearner, he should buy a term insurance cover of at least Rs 1 crore. This will cost him about Rs 12,000 a year. He should also enhance his family’s medical insurance. If the premium is higher at Rs 15,000 a year, he will save roughly Rs 3,000 in tax

Income from employer

Tax-saving investments

Other deductions

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