Saving taxes is easy. Many citizens are concerned only with Section 80C to save taxes. Did you know that parents, wife and kids can help save taxes?
Its tax season and tax saving must be a top priority. Take care of loved ones and they will save taxes. Use tax exemptions, tax deductions, parents, wife and children to save taxes. Read through seven ways your family can help save taxes.
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You get tax deduction up to Rs 25,000 a year on health insurance premiums paid for self + spouse + kids under Section 80D of the income tax act. If parents are above 60 years (senior citizens), you get tax deductions on health insurance premiums paid up to Rs 50,000 a year.
Avail health insurance and save tax up to Rs 75,000 a year. This is health insurance for self + spouse + kids and also senior citizen parents who help save tax.
If you are salaried, save tax by paying rent to parents and also avail HRA (House Rent Allowance). The property you are residing (staying), must be owned by parents. You can’t be a co-owner of the property.
The rent paid to parents is added to their taxable income and taxed as per income tax brackets. Your parents will have to show rental income (this is the rent paid by you to parents), in ITR (Income Tax Return) if their gross income is above basic tax exemption limits.
SEE ALSO: Income Tax Saving Tips
You can gift money to parents if they fall in the lower income tax slab and you are in higher tax slab. Gifts to parents are not taxed. Open fixed deposits in parent’s name. As parents are in the lower income tax slab, they pay lower tax on the FD interest. If you have invested in the FD, you would have to pay higher tax by virtue of falling in higher income tax brackets.
Let’s say you transfer money to spouse’s bank account as a loan. She uses the money to start a business. This is a loan and must be returned. You charge interest on the loan. This interest must be reasonable and interest income shown when filing your ITR. The income earned by your wife is not clubbed with your income.
You can show monetary transaction as a loan to save tax. You can buy a property in wife’s name or transfer a second property to her. The rental income is not treated as your income, if your wife pays nominal interest on the loan. Your wife can also transfer her jewelry equivalent of property value to you. Then, the rental income is not added to your taxable salary.
You can transfer money to adult child (When the child turns 18). This person is treated as a separate individual for tax purposes. You can transfer money to major child and avail another tax exemption up to Rs 2.5 Lakhs. Gift major child money and invest for tax-free gain. You can also transfer all investments for child’s future (These are deposits and investments) in major child’s name.
Avail joint home loan (you + spouse) and buy property to save taxes. Make spouse the co-owner of the property. This enhances loan eligibility. Both you and spouse claim tax benefits on home loan principal under Section 80C and home loan interest under Section 24 to save taxes. Both you + spouse cannot claim tax benefits on the same amount and hence a split in proportion of repayments to claim tax benefits.
You get tax deduction on tuition fees paid for two children under Section 80C of the income tax act, up to Rs 1.5 Lakhs a year. This deduction can be availed by the parent who pays tuition fees from his income. This deduction is available only for two children.
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