As soon as the tax filing season approaches, we keep searching for ways and opportunities to minimize our tax burden. While searching for legalized ways, the first and foremost option that any taxpaying individual opts for is Section 80C of the Income Tax Act.
However, It’s time you know that along with Section 80C, there are some other affordable ways to save more tax, and one of them is via the investments made for your parents, spouse, and children. The taxpayer can avail of additional tax benefits once he makes investments for his family. Keep scrolling to learn how your family members can help you save more tax.
Save More Tax by Purchasing Health Insurance
Purchasing health insurance for members dependants on you, such as your children, spouse, or parents, can help you save more tax. The premiums paid for health insurance will help you avail of deductions under Section 80D of the Income Tax Act. The tax exemption amount will be based on the health insurance plan that one chooses.
With the help of Section 80D, one can avail of deductions of up to Rs. 25,000 if his parents are within 60years of age and can be entitled to the benefit of Rs. 50,000 if they are senior citizens. Moreover, a taxpayer can claim up to Rs. 25,000 for buying health insurance for himself, his spouse, children, or parents.
Let’sLet’s understand the tax deduction process better with a table:
| Individual policyholder | The premium for individual health insurance (Rs.) | The premium for parent’s health insurance (Rs.) | Deduction as per Section 80D (Rs.) |
| Individual (including children and spouse) within 60 years and parents under 60. | 25,000 | 25,000 | 50,000 |
| Individual below 60 but parents are senior citizens | 25,000 | 50,000 | 75,000 |
| Both parents and individual above 60 years | 50,000 | 50,000 | 1,00,000 |
One can also include the medical bills incurred for preventive or annual health checkups if the premium or the insurance amount does not reach the maximum deduction limit specified in the laws. One can also get an additional tax benefit of Rs. 5000 for the expenses incurred on the health checkups for the family members.
Dependents with a Disease or Disability
If any of your dependents are disabled or have a disease, then you can claim tax deductions under Section 80D of the Income Tax Act on account of the expenses of their treatment and rehabilitation. Moreover, you can also save taxes against the amount paid towards any policies or schemes purchased for these family members.
To avail of this deduction, it is essential that you have a medical certificate from a medical certificate that specifies the disability of the dependant person and who he is dependent on. This certificate needs to be renewed from time to time.
One can also claim deductions under Section 80DDB of the Income Tax Act for the medical advances paid for diseases specified in the laws. The taxpayers can avail of this deduction for the expenditure incurred on the treatment of specified diseases for parents (within or above 60years), spouse or self, children, siblings, or other dependant individuals.
Go through this tabular explanation to comprehend the provisions better.
| Section of the Income Tax Act | Deduction Amount | Reason |
| Section 80DD | Up to Rs. 75,000 if the disability of the person is between 40% to 80% | For the expenditure incurred on a disabled dependant |
| Section 80DDB | Rs. 40,000 if the dependent is under 60 years of age
Rs. 1 lakh if the dependent is above 60years of age |
For the expenses when a dependent person has a specified disease |
Paying Rent to Your Parents Can Help Save Taxes
When a salaried employee pays rent to his parents, he can claim tax exemption under HRA on his salary. This can be the rent that you pay to your parents for living in their house. However, you must note that the home must be in your parents’ name and shouldn’t be co-owned by you.
The rent that you pay to your parents will be seen as income on your parents’ side and taxed accordingly. Moreover, if the rent amount you pay exceeds Rs 1 lakh in a year, make sure you submit your parents’ PAN card details to your employer.
Getting an Education Loan for Your Children
A taxpayer can claim deductions under Section 80E of the Income Tax laws if he takes up an education loan for his children. The interest paid while repaying the loan will be free of tax, and it will not have any upper limit.
Paying Tuition Fee for Your Children Can Save Tax
The expenditure incurred on school fees purposes can be subject to deductions according to Section 80C of the Income Tax Act. It can be claimed by the taxpayer who pays the tuition fee from his gross income, and this provision can only be availed for two children. Also, it is important to note that this deduction can only be applicable in tuition fees and it does not cover any other form of fees.
Investing Money for Your Parents
To save more tax, you can provide your parents with an amount of money every year, provided they belong to a lower tax slab than yours. You will not have to pay any gift tax for the money you give to your parents. Besides, you can also consider opening an FD in your parents’ name if they belong to a tax slab lower than you. It is because the interest rate paid by your parents will be lower compared to what you would have had to pay.
Furthermore, if your parents belong to the senior citizens’ category, then having an FD will allow them to earn more as the banks offer higher interest rates for them. According to Section 80TTB of the Income Tax Act, the senior citizens can avail of tax-free interest that can go up to Rs. 50,000 for different FDs in a financial year.
Note: Investing money in the name of your spouse will not be a tax-saving initiative. Any income arising from that investment will be clubbed with the husband’s income, so he will have to bear the taxes.
Having a Joint Property with Your Spouse
Buying a joint property co-owned by your spouse can help you save more tax. Besides increasing your chances of loan eligibility, it can help to avail tax deductions for both the husband and the wife on the interest payable against the borrowed capital amount. However, the couple will not be allowed to claim the same amount of tax deductions; they will have to split the amount.
Likewise, the rent earned on a property co-owned by a couple will be subject to taxation for both in the same ratio in which they share the property. If the ratio is not specified, it is divided equally between the husband and the wife.
Key Takeaway
When it comes to tax-saving, making investments for the family members can also be an easy step. While you ensure your family members’ well-being, you can get legalized opportunities to save more tax via the investments.
Get to know the provisions mentioned in the Income Tax laws so that you make outlays as per the regulations and get substantial tax benefits in return. For added information regarding the provisions mentioned, contact FinGurus!