Tax Optimiser: How Wahi can cut tax by Rs 94,000 via education loan, NPS

By Sudhir Kaushik of Taxspanner.com

Ahmedabad-based scientist Mansi Wahi pays a high tax because her pay structure is not very tax friendly and she is not claiming some of the deductions available to her.

Taxspanner estimates that Wahi can reduce her tax by over Rs 94,000 if her organisation offers her the NPS benefit, some taxable allowances in her salary are replaced with tax-free perks and she takes an education loan for her daughter’s studies.

Income from employer

Wahi should start by opting for the NPS benefit under Section 80CCD(2d). Under this, up to 10% of the basic salary put in the scheme by the employer on behalf of the employee is tax deductible. If her organisation puts Rs 13,850 (10% of her basic salary) into the NPS every month, it will cut her annual tax by around Rs 52,000. Another Rs 15,600 can be saved if she invests Rs 50,000 in the NPS on her own under Section 80CD(1b).


Some perks (conveyance, medical) in her pay package are taxable. If these are replaced by other taxfree perks (telephone bills, books and periodicals, food coupons) she can save another Rs 11,000 in tax.

Being a central government employee, Wahi and her family are covered under the CGHS. But her daughter will soon turn 18 and will be out of coverage once she becomes independent. If Wahi buys health insurance for her, a premium of Rs 5,000 will cut tax by Rs 1,560. Also, if she take an education loan of Rs 4 lakh and pays Rs 40,000 interest in a year, the deduction under Section 80E will cut tax by Rs 12,500.

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