Verma is handicapped and hence eligible for deduction under section 80U. But due to disability, he is unable to travel and claim exemption for his LTA. He should ask his company to replace LTA with gadget allowance under section 17(2). Gadgets and other items such as furniture can be bought in the name of the company and given to the employee for personal use.
Its importance increased during the work from home phase after Kovid. The employee is taxed for 10% of the value of such property provided by the company for personal use. If Verma gets Rs.60,000 per year (Rs.5,000 per month), his annual tax will be reduced by about Rs.17,000. Next, they should ask their company for some basic tax-exempt components, such as a newspaper allowance. If he gets Rs 1,000 per month for newspapers and magazines, his annual tax will be reduced by about Rs 3,750.
There is little scope for further reduction in tax. Verma is already Investment In NPS And he has also opted for the NPS benefit offered by his company. Being disabled, he also gets a meal coupon and a tax-free conveyance allowance. By purchasing a second home with a home loan, Verma can further reduce the tax. If he pays an interest of Rs 2 lakh on the loan, his tax will be reduced by Rs 62,400. But buying a home is a major financial decision and tax savings alone should not be the deciding factor.
write to us for help
Paying too much tax? Write to us at etwealth@timesgroup.com with ‘Optimize My Tax’ as the subject. Our experts will show you how you can reduce your taxes by tweaking your salary and Investment,