‘Families Are That Compass That Guide Us, Inspire Us and Comfort us When We Falter’
But additionally, as family members we can save money and grow together. Let’s dive into the article to understand how to take family route for saving taxes.
WAYS OF PLANNING TAXES THROUGH FAMILY MEMBERS:
IN CASE OF HOME LOAN: It is advisable to go for a joint home loan with your wife in order to claim separate benefit for deduction for principal amount under Section 80C and for claiming deduction of interest U/S 24(b) of Income Tax Act,1961
HEALTH INSURANCE OF PARENTS : An individual can claim a deduction under Section-80D of up to Rs 25,000 for the insurance of self, spouse, and dependent children. An additional deduction for the insurance of parents is available to the extent of Rs 25,000 if they are less than 60 years of age, or Rs 50,000 if parents are aged above 60. If both the taxpayer and the parent whom the medical covers have been taken for are aged more than 60 years, the maximum deduction that can be availed under this section is to the extent of Rs 1,00,000.
EDUCATION EXPENSES OF CHILDREN: The tuition fee paid for the education of two children is eligible for tax deduction under Section 80Cof up to Rs 1.5 lakh. The fee can be paid to any school, college, university or an educational institute situated in India. Further interest on education loan can be claimed under Section-80E of Income tax Act, 1961.The deduction allowed is the total interest part of the EMI paid during the financial year. There is no limit on the maximum amount that is allowed as deduction. The loan should be taken for the higher education of self, spouse or children. The loan should be taken to pursue higher studies. It does not matter whether such education loan is taken for higher studies in India or outside India. The deduction for the interest on loan starts from the year in which you start repaying the loan. It is available only for 8 years starting from the year in which you start repaying the loan or until the interest is fully repaid whichever is earlier. Further exemption under Section 10(14) of Income tax act: Children’s Education Allowance: Rs100 per month per child up to a maximum of 2 children. Hostel Expenditure Allowance: Rs 300 per month per child up to a maximum of 2 children.
THROUGH SUKANYA SAMRIDHI ACCOUNT: The girl child has to be below the age of 10 at the time of account opening. Multiple Sukanya Samridhhi accounts cannot be opened for a single girl child. Only two SSY accounts are allowed for a family i.e., one for each girl child Sukanya Samriddhi Account Scheme is a small deposit scheme for girl child, as part of ‘Beti Bachao Beti Padhao’ campaign, which would provide income tax deduction Under section 80C of the Income Tax Act,1961 and exemption of Interest from Income Tax. Besides being a tax saving instrument, it offers higher interest rate and flexibility in deposits.
PAYING RENT TO PARENTS: Salaried individuals can save tax by paying rent to their parents and availing the House Rent Allowance (HRA) exemption benefit. However, the property in which you are staying in needs to be owned by one or both your parent(s). You can’t be the property’s co-owner. The rent you pay is income in the hands of your parents, and their income will be taxed as per the prevalent tax slab where they can claim standard deduction @ 30% of annual rent. This thing cannot be beneficial always. One needs to evaluate the benefit and decide the optimum amount of rent. For e.g. One is in 30% tax slab but parents are retired or do not have any income or have a lower tax slab then this arrangement can be advantageous. Also, if your rent amount exceeds Rs 1 lakh a year, one needs to submit the PAN card details of his/her parents.
INVESTING ON SPOUSE’S/ PARENTS NAME: In case of unearning wife or wife falling in a lower tax bracket, amount can be invested in her name or gift money to wife and she reinvests and if such amount is invested in tax free instruments e.g., tax-free bonds such that the income received is tax free, then it’s clubbed to husband’s income under Section-64 because of clubbing provisions but not taxed because of it being a tax-free instrument. And if this is reinvested further, it is treated as wife’s income and not clubbed to husband’s income.
TAX PLANNING THROUGH ADULT CHILDREN: In case you have major children I.e.,18 years or older who are either studying or earning at a lower tax slab than you, then gifting your surplus money and investing in their name will neither attract gift tax nor clubbing of income will apply. Income earned out of investments made by your major Children out of the gifts given by you will be taxed in their hands only.
PPF ACCOUNT IN MINOR CHILD’S NAME: A parent can open a PPF account in the name of the child in the capacity of being guardian of the minor. PPF or Public Provident Fund is a savings scheme that offers income tax benefits under Section 80C and is also a good instrument towards long-term savings with both the interest and maturity being tax-free. Also, if savings account is opened in case of minor child such savings account interest can be exempt up to the limit of Rs 1500 per minor child under Section-10(32) of Income tax Act,1961.
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