Parents, spouse and children can help save taxes

Parents, spouse, and children can help save taxes

In addition to providing emotional and physical support and comfort, family members can also play a key role in providing financial benefits.

Regarding income taxes, some heads of money may be associated with specific family members in order to obtain tax relief.

Invest, insure, and save through parents, spouses, and children to reduce tax liability.

1. Parents

a. Invest in their name

If parents fall into the non-taxable or lower tax bracket, then this can invest on their behalf by giving them money.

This amount will not be taxable because gifts of money to specific relatives are not taxed.

This money can be invested in the elderly savings system, the post office, or other tax-saving programs, even in term deposits.

The elderly benefit from a tax exemption of up to Rs 50,000 on the interest income from savings or fixed deposit in any bank, post office or cooperative bank, against Rs 10,000 for those under 60. Even if the interest exceeds the exemption limit, they will pay a much lower tax.

Tax benefit under Section 80TTB i.e. for savings or term deposits.

Savings: Rs 50,000-2.5 lakh (depending on parents' income, age) + Rs 50,000 (interest income)

The tax exemption limit for citizens under 60 is Rs 2.5 lakh, but for people over 60 it is Rs 3 lakh, and for people over 80, it is Rs 5 lakh.

b. Pay the rent to parents

If the person is a salaried employee and lives with their parents in a house they own and not in a condominium, they can pay the rent and apply for an HRA exemption.

It will be advantageous if they fall into the tax-exempt income limit or into a lower tax bracket than him/her.

Although this amount is taxable in their hands, they can claim a deduction of 30% of the annual rent for repairs and maintenance under section 24.

Remember that if the rent is more than Rs 1 lakh per year, their PAN card details will need to be shared.

Tax benefit under: section 10 (13A)

Savings: the lesser of these three

a) Actual rent paid less than 10% of base salary

b) Total HRA provided by the employer

c) 40 to 50% of base salary depending on residence conditions

vs. Buy health insurance

If a person purchases health insurance for parents over the age of 60, can claim a tax deduction of up to Rs 50,000 for the premium paid.

For parents under 60, this amount is Rs 25,000.

Tax benefit according to article 80D

Savings: up to Rs 25,000 / 50,000 

a. Take out a joint mortgage

For the husband and wife who are co-borrowers and co-owners of an independent property, each can claim a tax advantage on the interest and principal paid for a home loan.

Tax benefit under article 80C (for the principal) article 24

Savings: up to Rs 7 lakh (depending on the amount of the loan taken)

Note: up to Rs 3 lakh for principal repaid (Rs 1.5 lakh each) + Rs 4 lakh for interest repaid (Rs 2 lakh each)

b. Give a loan

give money to the wife and it is invested, the income will be assimilated to income and taxed unless you choose a non-taxable instrument like the PPF. Instead, one can give a loan to the spouse who has no or low income, at a reasonable rate of interest.

Although interest will be added to income and taxed, she will be able to save money if she invests in an instrument with a higher rate of return.

Tax benefit under NA

Savings: If, for example, give a loan of Rs 2 lakh to the wife at 6% interest and she places it in a mutual fund in stocks giving 10% of return, the capital gain less of Rs 1 lakh in a year will be tax-free.

vs. Student loan

If a person has taken out a student loan for their spouse for higher education, they will benefit from a tax advantage on the repayment of interest for a maximum period of 8 years from the year in which the interest payment begins. Remember that the loan must come from any financial institution such as a bank or any other government-approved banking institution.

Tax benefit according to Section 80E

Savings: If, for example, his gross taxable income after all deductions is Rs 7 lakh and he repays Rs 2 lakh as loan interest, his taxable income would be Rs 5 lakh.

3. Children

a. Invest for a child in PPF, mutual fund, unit-linked insurance plan

A person can invest on behalf of their child as an investment in the PPF, certain mutual funds, unit-linked insurance plans and traditional insurance plans are entitled to a tax benefit under the article 80C.

The income will be clubbed with his and taxed at the applicable rates.

To avoid this, you can invest in tax-exempt instruments like the PPF.

He can also invest in stock mutual funds as there is no tax if the gain is less than Rs 1 lakh per year.

Tax advantage according to article 80C (PPF, mutual funds, unit-linked insurance plan)

Savings: up to Rs 1.5 lakh (u / s 80C) + investment income.

b. Open a bank savings account

If he opened a savings account for one child, Rs 1,500 of interest income per child for two children will be tax-exempt.

Indeed, any income will give the right to an exemption of Rs 1,500 per year.

Tax benefit under: section 10 (32)

Savings: Rs 1,500 per child

vs. Pay tuition / school allowance / hostel

If it has not exhausted the Section 80C deduction limit, it may include tuition paid for up to two children each year.

If he is an employee, he can also request an exemption of Rs 100 per month, per child, up to two children, as an education allowance for children, and Rs 300 per month, per child as an allowance for household expenses.

Tax benefit according to: Section 80C, Section 10

Savings: up to Rs 1.5 lakh (u / s 80C) Rs 2400 + Rs 7200 per year (u / s 10)

re. Buy health insurance

If he pays the health insurance premium for his spouse and children, he will be entitled to a tax exemption. It also includes all preventive health checks.

Tax benefit according to Section 80C, Section 10

Savings: up to Rs 1.5 lakh (u / s 80C) Rs 2400 + Rs 7200 per year (u / s 10)

e. Deduction for disabled dependents, illness

If he has a child or dependent parent (spouse, children, parents or siblings) with a specific disability or illness that requires heavy medical or maintenance expenses, he enjoys a tax advantage on the expenses. he hires.

Tax benefit according to: Section 80DDB

Savings: If the dependent is under the age of 60 and suffers from a specific illness, they can claim a deduction of Rs 40,000, or actual expenses, whichever is less.

If the person is 60 or over, they can claim Rs 1 lakh, or actual expenses, whichever is less.

In the event of disability, if it is between 40 and 80%, he can claim a maximum deduction of Rs 75,000.

If the handicap is greater than 80%, the deduction available is Rs 1.25 lakh.

F. Invest in the names of adult children

If his child is over 18, he will pay his own taxes on any income he earns, which means clubbing rules will not apply and his income will not be added to your income. If he falls into the category of tax-exempt income and gives him money that he invests in tax-exempt instruments, the income he earns will be tax-exempt.

Tax benefit under NA

Savings: Depends on the instrument in which the money is invested.

g. Student loan

If he has taken out a student loan for his child, he will benefit from a tax deduction on the repayment of interest up to 8 years from the year in which the payment of interest begins.

Remember that the loan must come from any financial institution such as a bank or any other government-approved banking institution.

Tax benefit under section 80E

Savings: If, for example, his gross taxable income after all deductions is Rs 7 lakh and he repays Rs 2 lakh as an interest component of the loan, his taxable income would be Rs 5 lakh.