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How to restructure your income, investments and expenses to optimise your tax
June, 23rd 2015

Kishore Lamba, a 32-year-old manager in a financial services company, is worried about his tax outgo. Lamba's company deducts more than Rs 10,000 as TDS every month from his salary. Lamba should rejig his salary structure. Instead of the high special allowance, his employer can put up to 10per cent of his basic salary in the NPS under Sec 80CCD2. He should also ask for perks such as newspaper and phone allowance which are tax free on submission of bills. These two measures will reduce his annual tax bill by Rs 20,000.

Lamba's tax planning also needs a rejig. He is putting too much in the PPF. Instead, he should put Rs 50,000 in the NPS under the new Section 80CCD1b. That will cut his yearly tax by Rs 10,000. He should also consider investing in ELSS funds or go for a low-cost online Ulip for better returns. Lamba is repaying a home loan but cannot avail benefits since the house is not self-occupied. He should give it out on rent and enjoy full deduction of the Rs 3.62 lakh he pays in interest. The rent (Rs 7,000 per month) will be taxed after a 30per cent standard deduction. But the deduction of the interest will cut his overall tax by almost Rs 62,500.

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