Hyderabad-based IT professional Rashmi Bajaj pays a low tax because her salary structure is quite taxfriendly and she avails of all the possible tax deductions and exemptions available to her. Even so, there is scope to reduce her tax further. TaxSpanner estimates that Bajaj can save nearly Rs. 48,000 in tax if her salary structure includes gadget allowance as well.
Though her salary is already packed with tax-free allowances, Bajaj should explore the possibility of getting a gadget allowance. Under Section 17(2), gadgets and appliances bought in the name of the company and given to the employee for personal use are taxed at 10% of their value. If Bajaj buys items worth Rs.1.5 lakh in a year (Rs.12,500 per month), her tax can reduce by around Rs.47,000. There is no need for paperwork because employee benefit solutions such as Zaggle Save can manage these perks digitally.
Other than the gadget allowance, there is not much scope to reduce tax further. Bajaj has already opted for the NPS benefit from her employer. Under Section 80CCD(2), 10% of her basic pay put in the pension scheme is tax-free.
Bajaj has chosen to stay in the old tax regime because she claims exemption for house rent allowance, invests in tax-saving options under Section 80C and has bought medical insurance covers for her family and her parents. She also invests Rs.50,000 in the NPS to claim deduction under Section 80CCD(1b). These deductions would not be available to her under the new tax regime and her tax would be significantly higher by almost Rs.1.22 lakh.
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