How to reduce income tax by Rs 35,000 with perks, health cover

Delhi-based marketing professional Sanjay Khosla earns well, but pays a low tax because his salary structure is fairly tax efficient. But TaxSpanner estimates that there is scope to reduce the tax further by rejigging the salary structure.

Khosla should start by asking his company to offer some tax-free perks, such as a gadget allowance, meal coupons and reimbursement of expenses on books, newspapers and periodicals. Under Section 17(2), gadgets bought in the name of the company and given to the employee for personal use are taxed at only 10% of their value. If Khosla buys items like computers, furniture and ACs worth Rs.60,000 in a year, his tax will be reduced by almost Rs.12,000. If he also gets meal coupons worth Rs.22,000 and reimbursement of books and newspaper bills worth Rs.18,000 (Rs.1,500 a month), his tax will come down further byRs.8,000.

He also needs to manage his investments better to reduce the capital gains tax liability. Last year, he made short-term capital gains of Rs.28,000 from his stock investments and paid almost Rs.4,500 as tax. If he holds his equity investments for a longer period (12 months or more), gains of up to Rs.1 lakh in a financial year will be tax-free. Khosla needs to manage his stock investments better to keep the tax liability within the tax-free threshold.

Khosla’s company provides group health cover to him and his parents, but he has also bought a health plan on his own. He should buy an independent health cover for his parents too. A premium of Rs.50,000 will bring down his tax by another Rs.15,600.

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Paying too much tax? Write to us at etwealth@ timesgroup.com with ‘Optimise my tax’ as the subject. Our experts will tell you how to reduce your tax by rejigging your pay and investments.

Sanjay Khosla, a marketing professional based in Delhi, earns a good income but pays a low amount of tax due to his tax-efficient salary structure. However, TaxSpanner suggests that there is room to further reduce his tax burden by adjusting his salary components.

Khosla can start by requesting his company to provide tax-free benefits such as a gadget allowance, meal coupons, and reimbursement for expenses on books, newspapers, and periodicals. According to Section 17(2), gadgets purchased in the company’s name and used personally by the employee are taxed at only 10% of their value. By purchasing items like computers, furniture, and ACs worth Rs.60,000 in a year, Khosla can reduce his tax liability by around Rs.12,000. Additionally, if he receives meal coupons worth Rs.22,000 and reimbursement for books and newspaper expenses totaling Rs.18,000 (Rs.1,500 per month), his tax burden will further decrease by Rs.8,000.

Furthermore, Khosla should manage his investments more effectively to lower his capital gains tax liability. By holding his equity investments for a longer period (12 months or more), gains of up to Rs.1 lakh in a financial year will be exempt from tax. Proper management of his stock investments will help him stay within the tax-free threshold.

Although Khosla’s company provides group health insurance for himself and his parents, he should consider purchasing a separate health cover for his parents. Investing in an independent health plan with a premium of Rs.50,000 can result in an additional tax savings of Rs.15,600.

If you find yourself paying too much tax, reach out to us at etwealth@timesgroup.com with the subject line ‘Optimise my tax’ for expert advice on how to reduce your tax burden through adjustments to your compensation and investments.