Sec 80C, Perks Cut Tax
Posted on September 30 2020
Mumbai based Priyanka Sharma is 27 years old and has no idea about the rules and regulations about tax. Last year, she paid a tax of nearly Rs. 30,000 because she has no idea how to save tax. But, this year her tax can be lowered to Rs. 13.450. She can even reduce her tax by over 13,000 only if she rejigs her pay structure and take the full benefits of Section 80C.
She should start investing more under the section 80C. She has purchased costly insurance policy which is considered to be junked. Instead, she should begin an SIP of Rs 10,000 in an ELSS fund. Even if she investing Rs. 70,000 under section 80C then she is reducing tax by Rs. 7,200.
She should ask her employer to reduce her special allowances and instead provide her tax free allowances. The transport allowance is more than Rs. 19,000 per year which does not require submission of bills. Even if she gets Rs. 34000 in tax free allowances then she is reducing tax by about Rs.3,500. He should also ask her company to put 10% of her basic pay in NPS under section 80CCD(2d). If Rs. 20,390 is put in the NPS then her tax will reduce approximately to RRRs. 2,100. But this will reduce her take home pay.
Sharma will earn interest from the fixed deposits as well. These are very ineffective instruments. She can save tax by shifting to debt funds.
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