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1. HRA (House Rent Allowance) should be exactly 50% or more of the Basic Salary Portion in order to take maximum HRA exemption relief:

2. Transport Allowance should be increased to Rs. 19200 per Annum (or Rs. 1600 per month) – If not using company car;

3. Medical Reimbursements should be Rs. 15000 per annum (or Rs. 1250 per month) – These perks are tax free on submission of actual bills;

4. Phone Bill Reimbursements should be Rs. 18000 per annum (or Rs. 1500 per month) - These perks are tax free on submission of actual bills;

5. Special Allowance is fully taxable, hence all the above adjustments should be carried out from this portion of the salary in order to keep the CTC intact;

6. NPS (National Pension Scheme) should be 10% of your basic Salary. This should be done through your employer u/s 80CCD(2) – A word of caution: This will reduce your take home salary as this investments cannot be withdrawn before retirement

7. Invest Rs. 2,00,000 in PF, Life Insurance, PPF, NSC, ELSS, NPS etc every year;

8. Medical Insurance/ Mediclaim to the extent of Rs. 25000 (self & family) & additional Rs 25000 (Parents)

Illustration

Mr. Joydeep from TCS, Kolkata draws a reasonably high Salary (CTC 15 lacs), but due to poor Tax Planning, he pays away very high tax

Income Heads

Existing

Proposed

Remarks

Basic

4,00,000

4,00,000

HRA

1,25,000

2,00,000

Atleast 50% of Basic

Special Allowance

7,47,870

5,72,270

Reduce from here

Transport Allowance

0

19600

Employer Contribution to PF

48,000

48,000

Phone Bills - Reimbursements

0

18000

These perks are tax free

Medical Reimbursements

0

15000

Performance Bonus

1,30,000

1,30,000

Food & meal Coupon

26,400

26,400

NPS (through Employer)

0

48,000

Gratuity

22,730

22,730

TOTAL

15 Lacs

15 lacs

TAX SAVING INVESTMENTS

Investments

Existing

Proposed

Remarks

Contribution to PF

48,000

48,000

Life Insurance

0

12,000

Term Cover for self is advisable

ELSS

0

50,000

Low Equity Exposure Suggested

Public PF

50,000

40,000

NPS – Employer

0

48,000

TOTAL

98,000

1,98,000

Other deductions

Heads

Existing

Proposed

Remarks

House Rent

(Rs. 20,000 per month)

2,40,000

2,40,000

Medical Insurance

40,000

40,000

Observations

1. Taxable Salary decreases by  Rs. 1,27,600 & Investments increases by Rs. 1,00,000;
2. Tax Savings per Annum – Rs. 70,328
3. Take Home Salary increases per month due to tax Savings – Rs. 6000

Note: Take home Salary also decreases by Rs. 4,000 as a part of retirement planning due to NPS component in the revised Salary

CA Ankit Agarwal
Blogger (www.precisezone.com/wp/)
Kolkata/ Siliguri/ Jaigoan


 

Published by

ANKIT AGARWAL
(DEF)
Category Taxpayers   Report

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