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Best Income Tax Saving Tips For Newly Married Couples

Updated on: 23 May, 2024 05:20 PM

New marriage brings new responsibilities, and no one can escape from that. Once married, couples start planning their different desires like higher education, exploring the world on a long vacation, investing in purchasing assets, etc. In the current scenario, if both partners work, they divide the share of day-to-day expenses. Right from paying the EMIs to investing in an asset or any other investment plan to whatnot?
What all counts here is financial planning. How well you both plan your finances together to accomplish your goals is all that matters. And financial planning with tax saving investments at inception will be an added advantage.

Tips to Save Income Tax for Newly Married Couples

Medical Insurance
The first and foremost task a couple plans for after getting married is the family's health and safety. As per Section 80D, a person and HUF can claim a deduction of Rs 25,000 for health insurance premiums for themselves and their family.
25,000 tax deduction is a deduction of 20,000 for insurance premiums and a sub-limit of 5,000 for going through precautionary medical checkups. So if you miss out on availing of the health checkups per year, you will miss out on the sub-limit. This is the maximum limit to claim the deductions as per Indian Income Tax Law.
A higher deduction can be claimed by paying the premium of your spouse’s health insurance policy and clubbing it into your expenses. A deduction that can be claimed on the premium you pay for yourself and your spouse is up to a limit of Rs 25,000. If the spouses are tax-paying individuals, they can both avail of maximum benefits individually under section 80(D), which totals tax deductions of Rs.50, 000 per year for paying the family's health insurance premiums.

For instance,
Premium on your Health Insurance – Rs 13,000
Premium on your spouse’s Health Insurance – Rs 11,000
The total deduction you can avail of – Rs 25,000
Taxable income – Rs 4,00,000
Deduction under Section 80D – Rs 24,000
Taxable income – Rs 3,76,000
By paying for your spouse’s Health Insurance, you can reduce your taxable income by Rs 10,000.

Home Loans
After marriage, the next thing young couples plan is to build a new home. Home loan has many tax benefits under Section 80C of the Income Tax Act. If you and your partner are both tax-paying individuals, you can attain double the tax benefits if you co-borrow your home loan on a 50:50 basis. As per Section 80C, the individuals are allowed a deduction of Rs. 1,50,000 for the home loan repayment per year. In the case of a married couple where both are taxable individuals and co-borrowers of the loan, this benefit can be doubled to Rs. 3,00,000 per year.
Additionally, as per Section 24(B), you can get Rs. 2,00,000 per year on the interest you pay on your home loan. Simultaneously this benefit can be doubled when both partners are taxpayers and co-borrowers of the loan on a 50-50 sharing.

Life Insurance Policy
Under a life insurance policy, both husband and wife can individually claim deductions under Section 80C. However, in such policies, the premium depends on the ages of the husband and wife. Thus the exemption claim also depends on the same.

Marriage Gifts
A wedding day implies receiving many gifts and blessings. However, the Income tax act has exempted the gifts received in cash or kind on d-day. This turns out to be a big tax-saving investment for newly married couples as a decent tax file can be created for your spouse if all the gifts received are used for this purpose. The only thing to remember is that there should be a proper record of all receipts and expenditures on marriage.

Tax File through Gift/Loan
If the husband gifts Rs. 10 lakhs as a gift to his partner and the wife invests this amount somewhere, generating Rs. 1 lakh per year. In these scenarios,
(1) As per the clubbing provision, this 1 lakh of the amount generated from the gift given by the husband will be clubbed back into the husband's income and taxed accordingly.
(2) If the wife further invests this Rs. 1 lakh in some other asset and earns Rs. 30000, then this 30,000 will not be clubbed back in the husband's income; this will be taxed separately as an investment made by the wife.
It is advisable to choose an asset like PPF etc., which is tax-free.

Proper investment planning
Proper investment planning can help such that the overall tax liability of the household decreases. By planning, couples can compound significantly and save more taxes. For instance, if one of the couples is under the bracket of 30% tax, they can make higher tax investments while the other can focus more on tax saving instruments. In addition, adding one more person to the family will help you generate tax-free income.

Benefits from salary structure
If you both are earning well, you can use the different components of the salary to avail yourself of additional tax benefits. House Rent Allowance (HRA), Leave Travel Allowance (LTA), and Medical reimbursement are some of these components.
For instance, if the husband and wife are staying in rented accommodation, then the minimum of the following will be tax-exempt on HRA:

  • Actual HRA amount received
  • 50% (metro city) or 40% (non-metro city) of the basic salary
  • Total annual rent paid - 10% of salary.

Leave Travel Allowance
If you and your partner are both taxpayers, then you can enjoy four travels each in a block period of four years, totaling eight travels in four years combined for the two partners. On this vacation, the expenditure done is tax-exempt. Though it all depends on the employer, as LTA is part of your CTC, the amount of LTA you have in your package defines the amount of money you can spend on your travels.
Within this amount, whatever you spend is tax-exempt, while whatever you haven’t spent gets added to your taxable salary, which is then taxed as per your income tax slab. Hence it is advisable to take holidays and go on vacations to keep your income tax low for both tax-paying partners in a marriage.

Frequently Asked Questions

Q- Can I get a maximum refund if I am married?

Yes, the above-provided tips can help you save more on taxes as some deductions and credits are reduced or not available to married couples filing separate returns.

Q- Is paying a salary to a wife can help in saving taxes?

Yes, if your wife is not in the income tax bracket, then you can pay the salary, and the combined tax liability of your family shall be decreased significantly.

Q- How can a housewife save taxes in India?

If money is gifted to the spouse and she invests this money in some equities or stocks then the husband will not be taxed for long-term capital gains of up to Rs 1 lakh in a year. Additionally, the amount will be treated as the income of the wife.

Q- Do married couples get more tax benefits than an individual?

Yes, married couples get more tax benefits to the number if they filed separately.

Q- In which cases filing ITR separately is more profitable?

For the cases where there's a big difference in the incomes of the couple or if one of the spouses has miscellaneous deductions or expenses.

CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.