Delhi-based marketing professional Ashish Pandey pays a low tax even though his pay structure is not tax-friendly. TaxSpanner estimates that Pandey can save more than Rs.48,000 in tax if his salary includes some basic tax-free perquisites and if he claims all the income-tax deductions available to him.

Pandey works for an edutech startup, which has a very uncomplicated pay structure. Even so, he should explore whether some basic perks, such as reimbursement of telephone and newspaper expenses, meal coupons and leave travel allowance, can be included in the pay. If he gets a telephone allowance of Rs.750, books and newspaper allowance of Rs.750 and meal coupons worth Rs.1,500 per month, his annual tax will come down by about Rs.8,500. Leave travel allowance of Rs.50,000 will shave off another Rs.10,400 from his tax liability.

Next, he should ask for the NPS benefit. Under Section 80CCD(2), up to 10% of the basic salary put in the NPS on behalf of the employee is tax-free. If his company puts Rs.5,034 (10% of his basic) in the NPS on his behalf every month, his tax will reduce by almost Rs.12,500.

While these steps will require changes by his company, there are other ways for Pandey to save tax. He can invest in the NPS on his own under Sec 80CCD(1b). An investment of up to Rs.50,000 will cut his tax by Rs.10,400. At 31, Pandey should put the maximum 75% of the corpus in equity funds. Pandey is covered by his company’s group health insurance, but he should also buy health cover for his parents. An annual health insurance premium of Rs.30,000 will reduce his tax by Rs.6,250.

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