Tax optimiser: How claiming medical expenses under section 80DD can reduce Sharma’s tax outgo

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Tax will be reduced significantly if Sharma claims deduction for the treatment and maintenance of a disabled dependant under Sec 80DD.

By Sudhir Kaushik

Bengaluru-based software professional Puneet Sharma is paying a high tax because he is not able to claim exemption for the perks in his salary. “I am not able to claim exemption for LTA and even the HRA is partially exempt,” he says. However, there are other deductions that he can claim. Taxspanner estimates that Sharma can reduce his tax by over Rs 65,000 if some of the taxable allowances in his salary are replaced with tax-free perks and he starts investing in the NPS.



Sharma should start by asking that the transport and medical allowances in his salary, which are now taxable, should be replaced with a newspaper allowance. He should also ask for a higher telephone allowance. This rejig will cut his tax by about Rs 5,600.

Income from employer

Income other sources

Next, he should ask his company for the NPS benefit. Under Sec 80CCD(2d), up to 10% of the basic salary put in NPS is deductible. If Sharma’s company puts Rs 60,000 (10% of his basic) in the scheme, his tax will reduce by about Rs 12,500. Another Rs 10,400 can be saved if he invests Rs 50,000 in the NPS on his own under Sec 80CCD(1b). Given his young age (he is 30), Sharma should opt for the Aggressive Lifecycle Fund that puts the maximum 75% in equity funds.



Tax-saving investments

Other deductions

Tax will be reduced significantly if Sharma claims deduction for the treatment and maintenance of a disabled dependant under Sec 80DD. The deduction of Rs 1.25 lakh will cut his tax by Rs 36,400.

Write to us for help

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.



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