Your Parents, Wife and Children Can Help you Save Taxes

We all want to grab all the legalized opportunities to minimize our income tax and section 80C is one of the most common saviors to do the same. So, if you have already explored the popular 80C Section of the Income Tax Act, 1961 for saving your taxes and still not satisfied, then here we are discussing some ways wherein your family can help you to save taxes and maximize your income tax return.

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Purchase Health Insurance for Spouse, Children, and Parents

Basically, the premiums that you pay for the health insurance plans of your dependants like your parents, spouse, and children allow you a deduction of tax under Section 80D of the Income Tax Act, 1961. You can avail this deduction of up to Rs.25, 000 for your children and spouse and for your parents as well you can avail the additional deduction of Rs.25, 000. If the parents are senior citizens, then you can get the deduction of Rs.50, 000. You can understand it more precisely by the below table:

Policyholder

The premium for Self Health Insurance (Rs.)

The premium for Parents Health Insurance (Rs)

Complete Deduction Under Section 80D (Rs)

Self (Includes children and spouse) under 60 years and the parents are also under 60 years

25, 000

25, 000

50, 000

Self < 60 years but parents> 60 years

25, 000

50, 000

75, 000

Self > 60 years and Parents > 60 years

50, 000

50, 000

1, 00, 000

Apart from this, you can also get a tax deduction of up to Rs.5, 000 for all the expenses that have incurred for annual medical checkups within the mentioned limit. The checkups can be for all the family members including your children and spouse. For example, if Raman has paid Rs.23, 000 for the health insurance of self, children, and spouse, and additionally paid Rs.5000 for medical checkups, then he can claim the income tax deduction of Rs.25, 000, which is the overall limit under Rs.25, 000.

Dependents with Disease or Disability

If your dependents have a disease or are disabled, then you can claim the income tax deductions under Section 80D of the Income Tax Act, 1961 against the expenses that have incurred for their rehabilitation and treatment. The amount that you have paid for purchasing specific policies and schemes for the maintenance of diseased or disabled dependants can also avail the benefit of an income tax deduction. To get this benefit, it is necessary to have a government hospital's medical certificate. This certificate should clearly mention the dependent’s disability and the name of the person on whom the disabled is dependent and should be renewed periodically. A tabular explanation of these deductions is mentioned below:

Income Tax Act’s Section

Deduction

Reason

80DD

Rs.75, 000 deductions, if the person is disabled between 40% to 80%

Differently abled dependents expenditure

80DDB

If the dependent is below the age of 60 years, then deduction of Rs.40, 000 is given

If the dependent is a senior citizen, then deduction of Rs.1 Lakh is given

Expenditure when the dependent has a specific disease

When You Pay Rent to Your Parents

If you are a salaried employee, then you can avail the income tax deduction as the exemption of HRA for the rent. This can be the rent that you pay to your parents if you are living in the house of your parents. In this case, the house must be owned by your parents and should not be co-owned by you. The rental payment is the income in the hands of your parents which will be taxed according to the tax slab. Moreover, if the rent amount that you are paying to your parents is exceeding Rs.1, 00, 000 in a year, then you have to submit the details of the PAN card of your parents to your employer.

Tuition Fees of Your Children

You can avail the income tax deduction for the tuition fees of your children under Section 80C of the Income Tax Act. The tuition fees of the school can be availed for a maximum of two children and can be up to Rs.1.5 Lakh.

Education Loan

The education loan that you have taken for your children can also be considered in income tax return under Section 80E of the Income Tax Act. The interest that you pay for the education loan is free of tax and does not have any upper limit.

Purchase Property with Your Spouse

Purchasing a joint property with your spouse attracts income tax advantages. Your loan eligibility automatically increases when your spouse becomes co-owner of your property. It resultantly extends the tax benefits for both wife and husband for the interest on the capital that has been borrowed. However, the husband and wife both cannot claim the same amount; hence they have to split the same. The similar is the case with rent of the property that is co-owned, it is taxable for both husband and wife but in the same ratio in which the property is co-owned between them. If your spouse and you have not mentioned the share in the property, then the share is divided equally for taxation to provide better efficiency to average the slabs of tax.

Invest Your Money In The Name of Your Parents

For tax saving, you can give some amount to your parents every year, if they come in the lower tax slab as compared to yours. You do not have to pay any gift tax for this amount. Moreover, you can get a fixed deposit opened in your parents’ name. Being at the lower tax slab than yours, your parents will have to pay a lower interest rate on the FD in comparison of what you have to pay. If your parents are 60 years old or more, then taking an FD on their name would attract more income from it. This is because the banks give FD on a higher interest rate for senior citizens. Moreover, as per section 80TTB of the Income Tax Act, a senior citizen can gain a tax-free interest of up to Rs.50, 000 through differently fixed deposits in one financial year.

By including these expenses while filing the income tax return, one can avail tax deduction in his/her income tax. However, there are some exceptions in most of the investments that you can make for your family. One is the tuition fees clause only caters to the fees that are paid towards tuition whereas the fees that you pay as exam fees or development fund is not counted here. Moreover, if you think to invest in the name of your spouse, then you will not be able to get any tax exemptions. This is because the income that arises from such investment is clubbed with your income.

However, these are small points that you must keep in your mind and avail the tax exemption with the help of your family.

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