Filing income tax returns? Know how your family can help you save tax

You can reduce your tax outgo by transferring money to your parents’ accounts and then investing in their name

Income tax ITR filing

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The tax season is nearing its end and you must be grabbing every opportunity coming your way to minimalize your tax outgo. If you have already explored the popular go-to avenues under Section 80 (C), here are a few ways your dependents can help you reduce your tax liability.

Insurance premiums for parents

Health insurance premiums for your dependents – parents, spouse and children allow you tax deduction under Section 80 (D). While you can avail deduction up to Rs. 25,000 for your spouse and children. Through premium payment for your parents, you can get an additional deduction of Rs. 25,000. Premium payment for senior citizen parents can get you tax deduction worth Rs. 50000.

Dependents with disability and diseases

If your dependent relatives are disabled and are completely dependent on you, you can claim deductions under Section 80 (DD) for the expenses incurred for their treatment and rehabilitation. The amount paid towards buying specific schemes or policies for their maintenance is also eligible for deduction.

Tuition fees for children

Tuition fees for your children are eligible for deduction benefits under Section 80 (C) up to Rs 1.5 lakh. You can claim this benefit for the payment of school fees for up to two children. If you have girl children, you can also consider investment in Sukanya Samriddhi Yojna for availing tax benefits. Tuition fees for up to two children are eligible for tax deduction.

Education loan

Education loan taken for children are also eligible for tax deduction under Section 80 (E). Interest payment on education loan is entirely tax-free without any ceiling on the amount.

Pay rent to your parents

Salaried individuals can avail tax deduction in the form of HRA exemption for rent payment. This includes rent paid to parents if they live in the parents’ home. However, the house needs to be owned by the parents and it cannot be co-owned by you.

The rental payment would be taxable in the hands of the parents as per the applicable tax slab.

Invest in your parent’s name

You can reduce your tax outgo by transferring money to your parents’ accounts and then investing in their name. Senior citizens are eligible for a basic tax exemption of Rs 3 lakh; people above the age of 80 years are eligible for tax exemption of Rs 5 lakh.

This amount would not attract gift tax in the parent’s hands. You can then invest the amount in a fixed deposit or other investment instruments in your parent’s name. If your parents fall under a lower tax slab, the tax liability would be lower than what it would have been, had you invested in your name. Your parents can avail further tax deduction by investing in instruments eligible for tax deduction under Section 80 (C). You can also transfer the money to your non-minor children or spouse, if they fall in a lower tax bracket than you to reduce tax liability.

[“source=timesnownews”]