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How to save Income Tax with your spouse
Your partner helps you with managing household tasks, and sharing financial responsibilities; then why not with saving taxes?? Yes, your partner in crime can now be your tax-saving partner as well. You might have heard about the clubbing provisions that income invested in one's name gets added in the name of the partner. But that happens when one among the couple is a non-earning member. The best thing about tax planning by the couple as a common unit is that both of you, while earning independently, can save higher taxes jointly.
There are various tax saving and wealth maximization routes that can be walked upon jointly for gaining the utmost benefit.
Tax-saving through a joint home loan
For availing home loans, furnishing your Income Tax Return is a mandatory condition. As you and your spouse are both earning members, you should avail of a housing loan on cumulative income. This will entitle you to increased tax benefits in these two ways:
Section 24B
The interest you pay on a home loan is eligible for deduction upto Rs.2,00,000/- u/s 24B of Income Tax Act 1961. By sharing the loan liability jointly, each one of you can claim a deduction upto Rs.2,00,000/-. Aggregating your total deduction of interest paid to Rs.4 Lakhs.
Section 80C
The principal part of the installment you pay will give additional tax benefits under section 80C. The principal amount repaid upto Rs.1,50,000/- is deducted from your gross income individually. This means if you apply for the loan jointly, you as a unit can take a total deduction of Rs. 3 Lakhs.
You might have clearly understood how easily you can work wisely to double your family tax savings. That too at no extra cost!!
A point of caution here is that to avail of tax benefits equally, you should pay installments in equal proportions. I.e. 50-50.
Tax-saving through a joint life insurance policy
When the mutual aim behind taking a life insurance policy is to secure the life of other partner. How about the initiative to take a joint insurance policy? Taking a joint policy will resort to your purpose of insurance together will entitle you to maximum tax savings. Life insurance qualifies as an instrument of tax saving under section 80C. If installments are paid jointly for the policy you can distribute them in the ratio of premiums, calculated based upon your respective age.
Tax-saving through Leave Travel Allowance
You now have another reason to plan trips. The significant expenditures incurred by a family include traveling. As per LTA rules, you can claim the benefits twice in a block period of 4 years. This means if you both alternatively avail of the benefit, you can plan a free trip once a year. This will save your expenditures and will help you build capital.
Taking use of House Rent Allowance
HRA is received by salaried employees and forms a noticeable part of your monthly salary. If you reside in a rented property, you can share the rent and claim HRA accordingly. Otherwise, if you live in your own house, one can pay rent to other and can avail the benefits of the provisions to offer lower income for taxation purposes. However, the partner paying the rent should not be a part-owner of the property.
Saving taxes through creating a TRUST
Like HUF, TRUST is taxed in its own capacity under section 164 of Income Tax. So parents can transfer part of their property to a trust made either for;
Unborn child
It is not necessary that the beneficiary of a trust is the living person. The trust can name an unborn child as a beneficiary or allocate the benefits to a hospital or charitable institution.
Minor child
The income will not be clubbed in the income of the guardian if a provision in the trust deed is inserted that the benefits of trust will be used for the child only after he attains majority.
Future spouse of minor
Trust can be created for the beneficiary being future spouse of the minor. For the uncertainty involved, there should be the addition of a clause to the trust deed that redirects the benefits to the charitable cause if the marriage doesn’t happen.
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Frequently Asked Questions
Q- Is it beneficial to have a joint life insurance policy?
Yes, having a joint life insurance policy can provide tax benefits under Section 80C. Both partners can claim deductions on the premiums paid.
Q- What are the tax benefits of investing in a Hindu Undivided Family (HUF)?
Investing through a HUF can help in tax savings as it is treated as a separate entity for tax purposes. Income earned by the HUF is taxed separately, potentially lowering the overall tax liability.
Q- Are there any tax benefits for wedding gifts received from family?
Yes, wedding gifts received from immediate family members are exempt from income tax under Section 56.
Q- What should we consider when planning joint investments?
When planning joint investments, consider each partner's tax slab to maximize tax savings. Investments should be made considering individual tax slabs to optimize benefits.
Q- How can we ensure equal tax benefits when paying installments jointly?
To ensure equal tax benefits, both partners should contribute equally to the installments, such as loan repayments or insurance premiums.
