Tax optimiser: Salaried Garg has no PF, so he must opt for NPS to cut tax outgo

Amit Garg works for a small startup based in Bengaluru. He earns a good salary, but more than 20% of it goes in tax because his pay structure is not very tax friendly and his tax savings are not fully optimised. Taxspanner estimates that Garg can reduce his tax by over Rs 92,000 if he gets more tax-free perks, his company offers him NPS benefit and he invests more in the scheme on his own.

Garg’s company is very small so it is not covered by Provident Fund. He should therefore ask his company to offer the NPS benefit under which 10% of the basic pay put in the retirement scheme is tax deductible under Sec 80CCD(2d). This will reduce his tax by almost Rs 38,000. Another Rs 15,600 can be saved if he invests Rs 50,000 in the NPS on his own under Sec 80CCD(1b). Given his young age, he should opt for the Aggressive Lifecycle Fund which puts 75% in equities.

Next, Garg should ask for the replacement of the medical reimbursement and conveyance allowance with tax-free perks such as LTA, newspaper and telephone reimbursements. These are tax free against submission of actual bills. He can also ask for food coupons. If he gets Rs 10,000 a month under these 3-4 heads, his tax will reduce by almost Rs 37,000.


Garg claims Rs 2 lakh tax deduction for the interest on his home loan. This is the maximum deduction one can claim on a home loan.

Income from employer

Income from other sources

Tax-saving investments

Other deductions

Amit Garg’s tax

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Tax optimizer disclaimer: Disclaimer: The facts and opinions written in this column are those of the author and do not reflect the views of economictimes.com.