Ways to Save Tax in India with the Help of Your Family

As tax season approaches, many individuals seek ways to reduce their tax burden. While several strategies are available, one often overlooked approach is seeking the help of family members.

The Indian government has introduced various ways to save tax in India, and involving your family members in these strategies can provide significant benefits. In this article, we will explore how your family can assist you in saving taxes, ensuring that you maximize your savings while staying within the legal boundaries set by the government.

How Can Your Family Help You Save Income Tax?

If you are finding ways to save income tax with the help of your family, you are at the right place! Today, we’ll help you list the five best ways to save tax as a salaried employee if your family depends on you.

1. Invest Under Your Parent’s Name

Investing in your parent’s name is the first way to save tax in India. You can do this by:

• Giving the money to your parents in hand (to not attract income tax)
• Making an investment by yourself but under your parent’s name (ensure your parents are in a lower income tax slab than you)

But how to save money on income tax by investing in your parent’s name? It’s simple. For example, if you have given your parents ₹2 Lakh, and they invest it in a fixed deposit, they can earn a return of about 8 to 9%. The interest rate on a fixed deposit is taxable, but since your parents are in the lower tax slab, they’ll be able to save more income tax. If they are senior citizens, they’ll be able to attract additional benefits.

2. Pay Rent to Your Parents

Another way of saving tax in India is by paying rent to your parents if you are living in their house. You can get a rental agreement under your name and give them monthly rent and claim tax deductions on it since a taxpayer can get tax deductions on rent under Section 10 (13A) of the Income Tax Act.

But certain conditions need to be followed:

• You can claim ₹60,000 annually as the maximum exemption limit
• Rent should be 40% of your basic salary in a non-metro city and 50% of your basic salary in a metro city
• The actual rent should be paid minus 10% of your basic salary
• Your employer should be offering HRA (House Rent Allowance)

In case you are self-employed, here are the conditions:

• A maximum of ₹60,000 can be claimed annually
• The actual rent should be paid minus 10% of your basic salary
• Adjusted total income should account for 25%

While this way of saving income tax is great, you need to understand that the rent you’ll show will be counted as rental income. You can benefit if your parents don’t fall in any income tax slab and their income comes from limited sources. But if they come under an income tax slab, they can claim a 30% of annual rent deduction for the money they spend on repairs and maintenance.

3. Buy Health Insurance for Your Parents

Save tax with health insurance! If you’re buying health insurance for your parents above 60, you can claim up to ₹50,000 annual deductions. You can get tax deductions on health insurance for parents who are not senior citizens, but the annual limit will be up to ₹25,000.

4. Pay Your Kid’s Tuition Fees

Tuition fees under income tax are deductible. So, you can claim a deduction if you’re paying tuition fees for your child’s full-time school, college, university, or any other educational facilities in India. This applies only to two children, and the maximum annual deduction allowed is ₹1.50 Lakh.

5. 5. Open Joint Home Loan with Your Partner

Under sections 24 and 80C of the Income Tax Act, you can save income tax by making repayments of joint home loans with your spouse.

• Under Section 24: Here, you and your spouse can claim a deduction of up to ₹4 Lakh (₹2 Lakh each). But deduction in this section is based on the repayment of interest rate.
• Under Section 80C: You and your partner can get a tax deduction of up to ₹3 Lakh (₹1.5 Lakh each). Unlike Section 24, the deduction will be based on repaying the entire amount, not just the interest rate.

Bottom Line

There are several ways to save tax in India with the help of deductions given by the government under the Income Tax Act. If you come under a taxable income slab, keep yourself informed on how you can save your money.

Author Bio:

Naina Rajgopalan has a thing for numbers and a deep fascination to learn about all things finance. She’s been money-wise from a young age and has always shared her knowledge and tips with those around her. Being a part of the content team at Freo Save, a digital savings account that offers up to 7% interest rate on savings along with benefits such as insurance on balance, safe & secure banking, and so on. Naina stays updated with the latest of what happens in the banking and fintech industries. She has taken upon herself to share her knowledge with readers across all walks of life to help them manage their finances and budgets better, so they can make better decisions while spending, borrowing, investing and saving.