Mumbai-based finance professional Shravan Gupta earns a high salary, but also pays a high tax. His salary structure is fairly tax friendly but he needs to claim the deductions available to him. Taxspanner estimates that Gupta can save almost Rs 1.7 lakh in tax if his company offers him certain perks, he opts for the NPS benefit and also invests in the pension scheme on his own.
Gupta should start by opting for the NPS benefit offered by his company. Under Sec 80CCD(2), up to 10% of the basic salary put in NPS is tax free. If his company puts Rs 20,235 (10% of his basic pay) in the NPS every month, his annual tax will reduce by almost Rs 76,000. Another Rs 15,600 can be saved if he invests Rs 50,000 in the NPS on his own. At 38, Gupta should allocate about 50% to equity funds of the NPS.
Income from employer
Next, he should ask his company to rejig his salary structure. The transport and medical allowance are now taxable. Gupta should ask his company for gadget allowance. Gadgets are purchased in the name of the company. Under Section 17(2), an employee is taxed for 10% of the value of such assets provided by the company for his personal use.
If he buys gadgets and other items worth Rs 2.4 lakh in a year, his annual tax will reduce by around Rs 68,000. Gupta pays nearly Rs 9,000 tax on interest from bank deposits. This can be avoided by shifting to debt funds. Interest is taxed at the normal rate but gains from debt funds are taxed at 20% with indexation benefit if held for more than three years.
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