5 ways your family can help you save taxes

Don’t all of us look for ways in which we can save our taxes?

Well, there are certain opportunities where aligning a portion of your income with your family’s financial portfolio, you can save your taxes as a unit.

Invest Money in Your Parents’ Name

Investing in your parents’ name can be a clever tax-saving move if they fall into the non-taxable or lower tax bracket. By gifting them money, you can then invest it in avenues like Fixed Deposits or the senior citizen savings scheme. This works even better if your parents are senior citizens because they usually get better interest rates on these deposits.

Pay Rent to Parents

If you’re earning and residing with your parents, you can turn this into a tax-saving opportunity. Pay them rent for the house they own, and you can claim it under House Rent Allowance (HRA). Your parents, in turn, can enjoy a deduction of 30% of the annual rent for repairs and maintenance. It’s a win-win situation where you will be able to save the least of:

  • Actual rent minus 10% of basic salary,
  • Total HRA provided by your employer,
  • Or 40-50% of basic salary.

Buy Health Insurance for Your Parents

Invest in health insurance for your parents who are above 60 years old and enjoy a deduction of up to INR 50,000 on the premium payable. This tax benefit falls under section 80D, offering a dual advantage of safeguarding your parents’ health and reducing your tax liability.

Take a Joint Home Loan

If you and your spouse are co-owners and co-borrowers of a self-occupied property, both can claim tax benefits on the interest and principal payable for a home loan. Under section 80C, you can save up to INR 7,00,000, depending on the home loan amount.

Invest for Your Ward in PPF, Mutual Fund, ULIP

Consider investing in your child’s future through avenues like the Public Provident Fund (PPF), mutual funds, and Unit Linked Insurance Plans (ULIPs). When you invest in certain mutual funds, ULIPs, and traditional insurance plans in your child’s name, you can avail tax benefits under section 80C. However, it’s important to note that the income generated from these investments will be taxable.

To avoid tax implications, you can opt for tax-free investment options like the PPF. Additionally, you have the flexibility to explore equity mutual funds, where gains below INR 1,00,000 in a year are tax-free.

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