How to restructure income, investments & expenses to optimise tax outgo
August, 10th 2015
Like many salaried professionals, Abhay Sehgal also has income from property and investments. His salary structure is fairly tax friendly because only 8% of his total income goes in tax. However, he can bring this down significantly if his employer agrees to rejig the components of his pay package and Sehgal avails of the deductions he is eligible for.
Sehgal can ask his company to reduce the taxable special allowance and bonus. Instead, he can get reimbursements for telephone, travel and newspaper expenses. He should also ask for LTA. All these are tax free on submission of actual bills. If these add up to Rs 90,000 a year, his tax comes down by Rs 18,000. Another Rs 10,250 can be saved if the company puts 10% of his basic in the NPS under Sec 80CCD(2).
Sehgal's father suffers from Parkinson's disease, which is one of the specified illnesses under Sec 80DDB. He can claim a deduction of up to Rs 80,000 for his treatment. That cuts his tax by another Rs 16,000. If he invests Rs 50,000 in the NPS under the newly introduced Sec 80CCD(1b), his tax comes down further by Rs 10,300.
He should also avoid tax unfriendly fixed deposits. If he shifts some amount into debt funds, he can defer the tax till the time he withdraws the money.