Kolkata-based Das can cut tax by investing in the NPS and buying health insurance.
Krishna Das earns well at the age of 30, but pays a very high tax because his salary structure is not at all tax friendly. Kolkata-based engineer can cut his tax by nearly Rs 45,000 if he puts more of his salary into the NPS and purchase health insurance for himself and his family.
Das should ask his employer to put 10% of his basic pay in the NPS under the Section 80CCD(2d). If every year Rs 98,400 is put in the NPS then his tax will reduce by Rs 27,000. But this will reduce his salary which he will take back home by almost Rs 5,900 every month. The NPS can reduce his tax further if Das puts Rs 50,000 in the NPS under the Section 80CCD(1b). This will cut down more tax for him by another Rs 10,300.
Das is young and should therefore choose for the combative lifecycle fund of the NPS which allocates 75% to equities till the age of 35. Every year, the exposure to equity comes down by 2%. Das’s employer offers him group medical cover but he should purchase on his own as well. A floater covers of Rs 5-6 lakh which will cost him nearly around Rs 15,000 and will cut down his tax by about Rs 3,000. Also, he can avoid the Rs 4,635 tax on the interest from the fixed deposits by either switching to debt funds.
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