More than 10% of Vikram Thakur’s total income goes in tax. The Goabased manager is not able to claim full exemption for his house rent allowance because his rent is very low. His tax saving investments are also not optimised.

Taxspanner estimates that Thakur can reduce his tax by almost Rs 73,000 if the pay structure is rejigged, he saves more for retirement and also takes a home loan to buy a house. Thakur should start by asking his company to reduce his special allowance and instead put that amount in the NPS on his behalf under Sec 80CCD(2d).

If Rs 70,724 is put in NPS, his tax will be cut by about Rs 22,000. If he invests Rs 50,000 more in the NPS under Sec 80CCD(1b), his tax can be cut by another Rs 10,300. The big savings will come from taking a home loan and claiming tax deduction for the interest paid. Though his HRA will become taxable, Thakur will still save Rs 35,000 in tax (if the deduction claimed is the maximum Rs 2 lakh).

Thakur’s company offers group medical cover to the family. If he buys additional cover with Rs 15,000, his tax will reduce by about Rs 3,000. Another Rs 1,700 can be saved by replacing bank deposits with debt funds in the portfolio.