5 Ways How Your Family Can Help You Save Income Tax

Posted by Ajeet Sharma on October 2nd, 2019

Any earning individual is eligible to pay Income Tax given the amount falls into the taxable bracket. However, your family can play an essential role in saving that tax amount. With proper investments and tax saving schemes up your sleeves, you could channelize the portfolio into something that proves beneficial not only for you but also for your loved ones.

Be it your spouse, parents or even kids; every single family member has an essential role to play. Therefore, as an individual who cares for the kin, it is your responsibility to plan can save your income tax.

Let’s have a walkthrough for the simple methods that can help you achieve the same.

Health Insurance

Health insurance is usually shrugged off as an additional liability. However, in the fast-paced world and stressful lives, a health insurance can help you save and manage the piling up medical bills with ease. Additionally, did you know that a medical insurance in place can save you up to 40,000INR annually?

Rebates in terms of medical insurance are processed under Section 80D. As an individual, you are eligible to claim 15,000 INR as health insurance benefits. As you extend the medical cover to your parents, you can save an additional 20,000, if they are senior citizens, irrespective of the fact whether they are dependent or otherwise.

It accounts for medical benefits such as preventive checkup costs, insurance premiums etc. Your spouse can also opt for a similar plan and cover her parents as well. So now you can be certain of their healthcare as well as a proper income tax saving strategy in place.

Interest With Respect To Bank Deposits

Interests accrued from fixed deposits are taxable. Therefore, as an earning individual, you tend to lose out on your hard earned money even if the fixed deposit scheme seems lucrative to you. A slight change of investment plan can help you save the TDS.

In case your spouse is unemployed, it makes sense to invest in fixed deposit in her name. Unless the entire amount falls below the 2.5 lakhs margin, the entire amount is deemed tax free. A similar approach can be adapted to invest in the name of parents and even your kids.

Thus, you end up with a lump sum saving amount at the time of maturity and also additional income tax.

Invest in Your Better Half

A nominal 1.5lakhscap under 80C is definitely not enough for individuals with a higher pay package. Therefore, it is not easy to run out on the limits. So what do you do now? How to save tax? The answer is fairly simple though! Gift some amount to your spouse.

The amount does not come with an upper boundary cut off.  You can vest out the sum to your relatives too and save on the likes of the gift tax. But all that glitters is not gold. Gifted money is also accountable for tax declaration. Therefore, experts recommend that the sum be invested in form a

Public Provident Fund or an Equity Linked Savings Scheme. Long-term gains are usually tax-free. Re-invest the earnings and make it an additional income source for your spouse.

Tuition Fees

If you have children, their tuition fees for school can help you claim compensation benefits under Section 80C of the income tax rules. To save an extra amount out of the income tax, you can make a contribution as a gift to your minor children.

A minor PPF account is generally non-taxable. This can act as an appreciation fund for your kid’s higher education and makes them eligible to operate the account once they become adults.

Child Insurance plans and mutual funds attract a substantial reduction in income tax too. The premium amount can be claimed as a rebate under the sections of the Income Tax Act.

Rent for Parents

HRA plays an important role. But what to do if you still live with your parents? Pay them the rent instead of a landlord and claim that house rent allowance. This makes your parents eligible to pay taxes given that the house would be registered in their name.

It has dual benefits too. Claiming HRA makes you eligible for income tax reductions. Income from self-occupied property and rented property also attracts tax reduction. Co-owned property is a boon in disguise. Not only can your parents split the rent among them, but also claim income tax deduction separately.

Tax planning can give a clear picture of what investments or reductions you intend to make in your income tax. An organised analysis and few tips, and you should be sorted for the upcoming fiscal years.

Author Bio: This article has been written and developed by Paisabank.org team. They loved to write about finance, insurance, banking, income tax and more.