Reduce taxable part of salary, use NPS to cut income tax outgo by Rs 1.02 lakh

economictimes.indiatimes.com:

NPS benefit offered by his company. Aney should start by opting for the NPS benefit from his company. Under Section 80CCD(2), up to 10% of basic salary put in the NPS is tax deductible.

Aney invests Rs 50,000 per year in the NPS on his own (under Section 80CCD (1b)).



If his company puts Rs.16,000 (10% of his basic pay) in the NPS every month, Aney’s annual tax will reduce by nearly Rs.60,000. Next, he should seek some tax-free perks, such as a gadget allowance, meal coupons and reimbursement of expenses on books and periodicals. Under Section 17(2), gadgets bought in the name of the company, and given to the employee for personal use, are taxed at only 10% of the value.

If Aney gets a gadget allowance of Rs 90,000 in a year, his tax will reduce by Rs 28,000. If he also gets meal coupons worth Rs 24,000, and reimbursement of books and newspaper bills worth Rs 12,000 (Rs 1,000 a month), his tax will come down by another Rs.11,000. Apart from his salary, Aney earns Rs 11,000 interest and Rs 1.2 lakh in rent.