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How to restructure your finances with tax-free perks

By getting one's company to pay for conveyance and transport needs, a person can buy a car on lease and include the EMIs in the compensation package. By getting one’s company to pay for conveyance and transport needs, a person can buy a car on lease and include the EMIs in the compensation package. 
Sudhir Kaushik of Taxspanner.com advises readers on how to restructure their income, investments and expenses to optimise their tax.

Rajiv Mohan Verma, 58, is a businessman and receives salary from the two companies in which he is a director. His total annual income of Rs 86.24 lakh also includes rent from property and interest on fixed deposits. More than 27 per cent of this goes into tax. But some smart rejigging can reduce his tax liability by more than Rs 8 lakh.

Verma should get his company to pay for his conveyance and transport needs. It can buy a car on lease and include the EMIs in his compensation package. Similarly, the maintenance costs and driver’s salary should also be added to his salary package. The taxable value of these perks is only Rs 39,600, but they can cut his tax by over Rs 3 lakh.

How to restructure your finances with tax-free perks

Next, Verma should opt for the Provident Fund. If his company puts Rs 4.3 lakh in the PF, he saves Rs 1.34 lakh in tax. Similarly, if the company puts 10 per cent of his basic salary in the NPS under Sec 80CCD2, he saves another Rs 1.11 lakh. However, both these measures will mean a reduction in his take-home income by Rs 8 lakh. Verma should also include other allowances that are tax-free on submission of bills. His phone, medical and newspaper bills can save him Rs 23,000 in tax. Another Rs 31,000 can be saved through the leave travel assistance (LTA).

How to restructure your finances with tax-free perks
How to restructure your finances with tax-free perks

Verma should avail of the new tax deduction under Sec 80CCD1b for investments in NPS. He should also avoid tax inefficient fixed deposits. Debt funds can help defer the tax, saving him almost Rs 2 lakh.

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