Chennai-based IT professional Pooja Iyer pays a high tax because she can't claim exemption for some of the allowances in her pay and doesn't claim some deductions available to her. Taxspanner estimates that Iyer can save more than Rs 40,000 in tax if her salary structure is rejigged and she invests in the NPS.
Iyer should start by asking her company to replace the LTA in her pay with tax-free perks. Due to lockdown restrictions across the country, it is unlikely that she will be able to travel and claim exemption for this amount. Instead, she should ask for an allowance for buying computers and household gadgets. This perks is tax free if the item is bought in the company’s name and used by the employee. If Iyer gets Rs 60,000 under this head, her tax will reduce by roughly Rs 12,500. Another Rs 1,250 ..
Next, she should ask her company for the NPS benefit. Under Section 80CCD(2) , up to 10% of the basic salary invested in the pension scheme is tax free. If her company puts Rs 5,967 (10% of her basic salary) in the NPS every month, her annual tax will reduce by almost Rs 15,000. Another Rs 10,400 can be saved if she invests Rs 50,000 in the scheme on her own under Sec 80CCD(1b). At 28, she should opt for and aggressive allocation that puts 75% of the corpus in equity funds and the balance in bon…