Bengaluru-based IT professional Akshay Kumar earns well but over 18% of it goes into tax as his salary is not very tax-friendly and he is unable to claim all the deductions available to him. Tax Spanner estimates that Kumar could save up to Rs 2.27 lakh in tax if his salary structure is changed, he opts for. NPS profit offered by his company, and that Investment In pension scheme also on its own. But his biggest tax savings will come from claiming HRA exemption.

Kumar lives with his parents in his grandfather’s house. “Since I am not paying rent, I cannot claim HRA exemption,” he says. If he pays rent of Rs 43,000 per month to his grandfather, his entire HRA can be tax-free. This will result in a tax saving of Rs 1.34 lakh. But his grandfather will be taxed on Rs 5.16 lakh as rent after 30% standard deduction. Thereafter, they should opt for NPS benefit. Under section 80CCD(2), up to 10% of the basic salary kept in NPS is tax free. If his company puts Rs 7,169 (10% of basic salary) in NPS every month, his tax will come down by about Rs 27,000. Another Rs 15,600 can be saved if he himself invests Rs 50,000 in NPS.

Kumar should also ask his company for some of the usual tax-free perks like meal coupons, LTA And a gadget allowance to cover the cost of working from home. If he gets food coupons of Rs 22,000, LTA of Rs 60,000 and Rs 60,000 for gadgets, his annual tax will be reduced by Rs 42,500. Kumar should also buy a health cover for his parents so that he can save around Rs 7,000 in tax.

write to us for help

Paying too much tax? Write to us at [email protected] with ‘Optimize My Tax’ as the subject. Our experts will show you how you can reduce your taxes by tweaking your salary and investments.