The Family Tax Plan: How Your Loved Ones Can Help You Save
“Beware the Ides of March!” Shakespeare made this line immortal in his famous play Julius Caesar. A few hundred years later, people in India still cringe when March approaches. The reason for this? Tax season.
Like any smart saver, you believe you have made all the tax investments possible but find you are still liable to pay taxes. Now, you are looking for more ways to cut your tax burden.
The good news is that you still have quite a few options left. Most of them involve your near and dear ones. So, here are simple ways to enlist your family in the good cause of tax saving.
Good for health, good for taxes:
Wellness is an expensive business. The only way to protect yourself and your family from soaring health costs is insurance. Health insurance for your family not only covers you financially in unforeseen events but also helps you save taxes.
If you are under 60, you can reduce your taxable income by Rs. 25,000 on health insurance premium paid for yourself, your spouse and dependent children. If you are above 60, you can claim deduction of up to Rs. 50,000.
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Living with parents? Pay rent:
Many of us live with our parents without paying rent. But did you know that you can pay rent to your mum and dad and claim House Rent Allowance (HRA) deduction? This not only makes you a proud contributor to the household budget, but it’s also a source of income for your parents.
It pays to gift:
It’s always a joy to gift your loved ones something special. Why not gift them an investment -- in a mutual fund, for example – especially if they do not have taxable income? How will it help in reducing your taxes? Returns above Rs. 1 lakh from equity mutual funds are taxed under long-term capital gains tax. By investing in your spouse’s name, you split the returns. Between the two, you can get tax exemption on gains up to Rs. 2 lakh – or Rs. 1 lakh every year.
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Share the home, and the debt:
A home is one of the biggest investments you will probably make as a couple. Why not maximise your tax benefits as a couple as well? When you buy a home with a housing loan, you are eligible for deductions of up to Rs. 3.5 lakh -- Rs. 1.5 lakh under section 80C on principal repayment, and Rs. 2 lakh on interest repayment under section 24. You can double this to Rs. 7 lakh if you take the loan jointly.
Invest in children’s education:
You want nothing but the best for your children. And investing in their academics can give you some great tax benefits. You can claim up to Rs. 1.5 lakh (per parent) as income deduction under 80C for tuition fees paid for up to four children (maximum of two per parent).
You can also claim exemption of Rs. 100 per month per child (up to two kids) as children’s education allowance and Rs. 300 per month per child as hostel expenditure allowance under section 10.
If you take an education loan to sponsor your child’s or spouse’s higher studies, you can claim the entire interest paid on it as income deduction under section 80C.
So, next time, you face some taxing times, you know whom to turn to – your family, of course.
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