Vimal Chheda, 33, pays more than Rs 10,000 in tax every month. Since his company allows tinkering with the pay structure, he can reduce the tax by almost Rs 30,000.
Chheda should start by asking his company to reduce his taxable allowances and replace them with perks that are tax free against submission of bills. If he gets LTA benefit and his phone bills are reimbursed, it will cut his tax by almost Rs 7,500. Further, if the company deposits 10% of his basic pay in the NPS, his tax will be cut by another Rs 10,000. If he has liquidity, Chheda should invest Rs 50,000 in the NPS to claim deduction under Section 80CCD(1b). It will cut his tax by Rs 10,000. Another Rs 2,500 can be cut by fully utilising the Sec 80C limit available to him.
However, he should note that the investments in the NPS will not only reduce his take home pay but will get locked for the next 27 years. The NPS does not allow partial withdrawals before retirement at 60 except in very dire circumstances.
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