Are you looking for ways to reduce your tax burden and save more money for your future? If yes, then you might want to consider involving your family members in your tax planning. Yes, you read that right. Your parents, spouse and children can help you save taxes in various ways, if you invest smartly and strategically. Here are some of the ways you can use your family to save taxes:
- Buy health insurance for the family: A medical insurance is a necessity that helps you save taxes. Under Section 80D of the Income Tax Act, you can claim a deduction of up to Rs 25,000 for the premium paid for yourself, your spouse and your dependent children. You can also claim an additional deduction of up to Rs 25,000 for the premium paid for your parents, or Rs 50,000 if they are senior citizens. This way, you can secure your family’s health and also save up to Rs 75,000 in taxes.
- Invest through your spouse: Exhausted your 80C limit? You can still invest in tax-saving instruments through your spouse and save more taxes. For example, you can open a Public Provident Fund (PPF) account in your spouse’s name and deposit up to Rs 1.5 lakh per year. The interest earned on PPF is tax-free and you can also claim a deduction for the amount deposited under Section 80C. Similarly, you can invest in other instruments like National Savings Certificate (NSC), Sukanya Samriddhi Yojana (SSY), etc. through your spouse and enjoy tax benefits.
- Loan money to spouse: Another way to avoid tax is by showing the monetary transaction as loan. If you give money to your spouse as a gift, then the income earned by your spouse from that money will be clubbed with your income and taxed accordingly. However, if you give money to your spouse as a loan and charge a nominal interest rate, then the income earned by your spouse from that money will not be clubbed with your income and taxed separately.
- Pay rent to parents: If you are living with your parents in a house owned by them, then you can pay rent to them and claim House Rent Allowance (HRA) exemption under Section 10(13A). This will reduce your taxable income and also help your parents earn some income from their property. Your parents can deduct property taxes and also claim a 30% standard deduction on the rental income. If they are in a lower tax bracket than you, then the family can save tax as a whole.
- Take education loan for children: If you have taken an education loan for the higher education of your children, then you can claim a deduction for the interest paid on the loan under Section 80E of the Income Tax Act. The deduction is available for a maximum of 8 years or until the interest is fully repaid, whichever is earlier. There is no limit on the amount of deduction that can be claimed under this section. The loan can be taken for any course of study in India or abroad.
These are some of the ways you can use your family to save taxes. However, before investing or making any financial decision, it is advisable to consult a tax expert or a financial planner who can guide you according to your specific situation and goals.