Tax Optimiser: How professional Mavalankar can save tax via NPS, rejigging perks

By Sudhir Kaushik of Taxspanner.com

Varsha Mavalankar is an IT professional based in Pune. Her pay structure is fairly tax friendly but there is scope to reduce the tax further. Taxspanner estimates that Mavalankar can reduce her tax by over Rs 40,000 if she gets more tax-free perks, she opts for the NPS benefit offered by her company and invests more in the scheme on her own.

The medical reimbursement and conveyance allowance in her salary are now taxable following the introduction of standard deduction. These can be replaced with the magazine and newspaper allowance and a higher telephone reimbursement. These perks are tax free against submission of actual bills. This rejig will save her about Rs 10,600 in tax.

Income from employer

Mavalankar has not opted for the NPS benefit offered by her company. “It will reduce my tax but I will get the money after a long time. The corpus will also not be tax free,” she says. Under Sec 80CCD(2d), up to 10% of the basic salary put in NPS is deductible. If she opts for this, her tax will reduce by about Rs 13,800. Another Rs 15,600 can be saved if she invests Rs 50,000 in the NPS under Sec 80CCD(1b).

Mavalankar is young and does not have adequate equity exposure. If she invests in the NPS, she should opt for the Aggressive Lifecycle Fund that puts 75% of the corpus in equity funds and gradually reduces it every year.

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