​Tax Optimizer: NPS, rejigging salary, buying medical cover can help Rao save more tax

Srinivasa Rao works for a media company in Bengaluru. His pay structure is fairly tax efficient and his tax outgo is only 6.1% of his annual income.

However, Taxspanner estimates that this can be pruned if Rao’s company rejigs his pay package, he saves more for retirement and buys more medical insurance for his family. Rao should start by asking his company to offer him NPS benefit.


INCOME FROM EMPLOYER




SRINIVASA RAO’S TAX

All figures are in Rs

Under Sec 80CCD(2d), if a company puts up to 10% of the basic in the NPS, that amount is eligible for deduction. Rao’s tax can be cut by Rs 8,000 if he opts for this benefit. Another Rs 10,000 can be saved if he invests Rs 50,000 in the NPS under Sec 80CCD(1b). Rao pays a premium of Rs 72,000 a year for a clutch of low-yield traditional insurance plans.

Taxspanner recommends that some of these plans can be surrendered or turned into paid-up policies. Instead, Rao should invest in ELSS funds through monthly SIPs. He should also buy a term insurance of Rs 1 crore. Though he already has a health insurance plan, the low premium suggests that the policy doesn’t offer adequate coverage. Rao should buy additional health insurance. This will cut his tax further by Rs 1,600.

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.