The new tax regime, though devoid of many tax breaks, offers deduction to NPS contributions under Section 80CCD(2). Under this Section, up to 10% of the basic salary put in the NPS on behalf of the employee is tax-free. If Gaikwad’s company puts Rs.6,880 (10% of his basic pay) in the NPS on his behalf every month, his annual tax will reduce by almost Rs.26,000.
The distribution of perks in Gaikwad’s pay structure is very lopsided. The LTA is more than Rs.4 lakh and Internet allowance is Rs.2,000 per month. “Since I am not able to claim that much, most of it becomes taxable,” he says. The scope of the Internet allowance should be enlarged to include mobile phone bills and the amount should be reduced to Rs.1,500 a month. If he gets reimbursement of newspaper bills worth Rs.500 a month instead, his tax will reduce by around Rs.1,900. Meal coupons worth Rs.2,000 a month will cut another Rs.7,500 from the tax liability.
Big tax savings are possible if his company gives Gaikwad gadget allowance. Under Section 17(2), gadgets bought for personal use are taxed at only 10% of the value. If Gaikwad buys gadgets worth Rs.1.2 lakh in a year, his tax will reduce by about Rs.37,500.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.
