Bengaluru-based software professional can save Rs 70K tax via Section 80C, 80CCD investments, tax free perks
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This is his first job and Kumar opted for the old tax regime. However, he has not made any investment under Section 80C except the mandatory contribution to the Provident Fund. He should start SIPs of Rs.30,000 in an ELSS fund and buy life insurance of Rs.1 crore. These will exhaust his Rs.1.5 lakh limit and save him about Rs.32,000 in tax.
Next, Kumar should ask his company for the NPS benefit. Under Section 80CCD(2), up to 10% of the employee’s basic salary put in the pension scheme is tax-free. If his company puts Rs.5,000 (10% of his basic salary) in the NPS on his behalf every month, his annual tax will reduce by about Rs.12,500. Another Rs.10,400 will be saved if he invests Rs.50,000 in the scheme on his own under Sec 80CCD(1b).
At 26, Kumar should opt for an aggressive allocation and put the maximum 75% of the corpus in equity funds.
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