James’s is an employer in a well known company which does not allow rejigging of the pay structure so there is very little scope for tax optmisation.
As per the estimation, the Kolkata-based manager can reduced the tax liability by over Rs. 25,000 if he puts more of his salary in the NPS account and also purchase the health insurance for his family.
He should start by asking his company to put 10% of his basic salary in the NPS account under the Section 80CCD(2d). For example, if Rs. 50,000 from his salary is put in his NPS account then the tax will reduce by Rs. 10,300. The tax can be reduce further if he puts Rs. 50,000 in the scheme under the Section 80CCD(1b). This will reduce more tax by Rs. 10,300, which means Rs. 20,600 has been reduced so far. But investing in the NPS will help him reduce tax and also he will be taking less pay home by Rs. 3,300. He will also have to shell out roughly Rs.4,150 every month to save about Rs. 860 in tax.
Also he needs to rejig his tax planning. He puts too much in the VPF and the PPF and has no equity exposure. Instead of VPF and PPF, he should start an SIP of Rs. 5,000 in an ELSS fund. In the NPS, he should choose for the aggressive lifecycle fund which allocates 75% to equities till the age of 35.
If he purchases health insurance cover for himself as well as his family which includes the senior citizen parents for Rs. 25,000, his tax will reduce by about Rs. 5,150.
Tax Assist is a professional income tax consultancy in India for both corporate houses and individual tax payers; the latter comprising Salaried Individuals, Seafarers, Professionals and Non Resident Indians.
With the help of Tax Assist and its team of income tax professionals, taxpayers can minimize their Income Tax liability, maximize their net income and create opportunities to save for current and future needs while maintaining proper accounting standards and income tax returns which are compliant with the Law.
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