Pune-based software program skilled Vinay Makhija pays a low tax despite the fact that his wage construction isn’t tax-friendly and he doesn’t declare all of the deductions out there to him. TaxSpanner estimates that Makhija can scale back his tax to zero if he opts for the NPS profit supplied by his firm and likewise invests within the scheme on his personal.
Makhija’s taxableincome earlier than deductions is Rs.11.39 lakh. If the online earnings (in any case deductions and exemptions) is diminished to lower than Rs.5 lakh, he can declare full tax aid underneath Part 87A. Makhija pays lease and claims HRA exemption for Rs.2.84 lakh. He additionally invests the utmost Rs.1.5 lakh underneath Part 80C. With the usual deduction of Rs.50,000, this brings down his web taxable earnings to a bit over Rs.7 lakh.
He can deliver it down additional by choosing the NPS profit supplied by his firm. Beneath Part 80CCD(2), as much as 10% of the essential put in NPS is tax-free. If his firm places Rs.5,016 (10% of his primary pay) within the NPS each month, his taxable earnings will scale back by Rs.60,200. It may possibly scale back by one other Rs.50,000 if he invests within the scheme on his personal underneath Part 80CCD(1b). At 27, Makhija ought to put the utmost 75% in fairness funds.
Subsequent, he ought to ask his firm for some primary tax-free perks, comparable to reimbursement of gas or conveyance bills, newspaper allowance and meals coupons. If he will get Rs.24,000 (Rs.2,000 a month) for conveyance, newspaper allowance of Rs.9,000 (Rs.750 a month) and meals coupons price Rs.22,000 per 12 months, his taxable earnings will scale back by Rs.55,000.
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If Makhija buys medical insurance coverage for himself and his dad and mom, his web taxable earnings will fall beneath Rs.5 lakh, thus making it totally tax-free.
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Paying an excessive amount of tax? Write to us at etwealth@ timesgroup.com with ‘Optimise my tax’ as the topic. Our consultants will inform you learn how to scale back your tax by rejigging your pay and investments.
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