Tax saving: Gurugram-based professional can cut tax by Rs 37,000 with NPS, various perks

Gurugram-based finance professional Harpreet Singh pays a low tax even though his salary is not very taxfriendly. However, there is scope to bring this down further. TaxSpanner estimates that Singh’s tax can be reduced by nearly Rs.37,000 if his pay structure is rejigged to include taxfree perks, his company offers him the NPS benefit and he invests in the pension scheme on his own as well.

Many of the perks, including conveyance allowance, in Singh’s salary are taxable. He should ask these to be replaced by some tax-free perks. If he gets communication allowance of Rs.6,000 (Rs.500 per month), books and periodicals allowance of Rs.6,000 (Rs.500 per month), and food coupons worth Rs.18,000 (Rs.1,500 per month), his tax will come down by about Rs.6,250. Leave travel allowance of Rs.40,000 will cut the tax outgo by Rs.8,300. Offering these allowances will not add to his employer’s paperwork because employee benefit solutions such as Zaggle Save can manage these perks digitally.

More tax can be saved if his company offers him the NPS benefit. Under Section 80CCD(2), up to 10% of the employee’s basic salary put in the pension scheme is tax-free. If his company puts Rs.4,000 (10% of his basic salary) in the NPS on his behalf every month, his annual tax will reduce by about Rs.10,000. Another Rs.10,400 can be saved if Singh invests Rs.50,000 in the pension scheme on his own.

Singh relies on the group health insurance from his employer. Group health covers have gaps and he needs to buy a health cover separately. A premium of Rs.8,000 for a health cover will further cut his tax by about Rs.1,650.

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