By Sudhir Kaushik from

Jamshedpur-based engineer Pranav Dwivedi pays a high tax because his salary structure is not very tax-friendly and he is unable to claim some of the deductions. Dwivedi lives in company-provided accommodation, so his HRA is fully taxable.

Added to his problem are taxable benefits such as transportation and medical allowances. Taxspanner estimates that Dwivedi can reduce his tax by over Rs 66,000 if he takes out a mortgage to buy a house, some of the taxable allowances in his salary structure are replaced by non-taxable allowances and he benefits from his company’s NPS.

Dwivedi should start by asking his company to replace the transportation costs and medical allowances from his salary with tax-free reimbursements such as phone allowances, newspaper bills and meal vouchers. These benefits are tax exempt against presentation of invoices and actual use. If he gets Rs 1,000 for the phone, Rs 500 for newspapers and Rs 1,833 in meal vouchers each month, his annual fee will be reduced by around Rs 8,300.

Employer’s income

Then he must apply to his company for the benefit of the NPS under section 80CCD (2). Up to 10% of the base salary put into NPS is tax exempt. If her company puts Rs 3,840 (10% of its base) into the NPS each month, it will reduce its tax by Rs 9,600.

Tax investments and other deductions


Pranav Dwivedi’s tax

Dwivedi-tax saving

His big tax break will come if he buys a house with a mortgage. Up to Rs 2 lakh of interest paid on a home loan can be claimed as a deduction. If he claims a deduction of Rs 2 lakh, his tax will be reduced by Rs 41,000. Dwivedi and his wife have group health coverage. He bought health coverage for his mother. If he also insures his father, his tax will be reduced by 5,200 rupees.

Write to us for assistance

Paying too much tax? Write to us at etwealth @ with “Optimize my tax” as the subject line. Our experts will tell you how to reduce your tax by readjusting your salary and your investments.

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