There are many provisions in tax laws that can help you lower your income tax burden with help from your family members
Pay Rent to Your Parents
If you are staying with your parents, you can pay rent to them and can claim house rent allowance against the rent paid. However, to claim the tax break, the house should be in the name of your parents. Also, they will have to show the income as under the head income from house property. Your parents can also claim a deduction of flat 30 per cent as maintenance charges from the rental income. So if you are paying Rs. 30,000 per month as rent to your parents, they will have to pay tax on only Rs. 2.52 lakh. Also, if they don't have any other source of income and are above 60, this entire income will be tax exempt as this is below the tax exempt limit (Rs. 3 lakh for those above 60 years of age and Rs. 5 lakh for those above 80 years of age).
Buy your parents a health insurance
You can claim a deduction of up to Rs. 25,000 against the medical insurance premium paid for yourself, your kids and spouse. But you can also get an additional deduction of Rs. 30,000 for paying the health insurance premium for your parents, if they are above 60 years of age. In total you can claim Rs. 55,000 as deduction against health insurance premium paid for your family.
Investing through family members
You can gift money to your parents as no tax is levied on gifts made to family members. Also, the rule of clubbing of income will not be applicable in case of your parents and adult child (above 18 years of age). So if you invest in your parents or adult child's name, then the gains or interest earned on investments will not be clubbed with your income. If your parent's income is below the overall exemption limit or if they fall in the lower tax bracket, you can save some taxes. Similarly, if your adult child is unemployed or falls in lower tax bracket, you can save tax.
Also, if your spouse is a homemaker, you can gift her some cash. No gift tax will be levied but there is a provision of clubbing of income. The gains or interest income that your spouse will earn on investment will be clubbed with your income. But if your spouse invests the money in tax-free instruments like PPF, then tax can be saved.
Pay Rent to Your Parents
If you are staying with your parents, you can pay rent to them and can claim house rent allowance against the rent paid. However, to claim the tax break, the house should be in the name of your parents. Also, they will have to show the income as under the head income from house property. Your parents can also claim a deduction of flat 30 per cent as maintenance charges from the rental income. So if you are paying Rs. 30,000 per month as rent to your parents, they will have to pay tax on only Rs. 2.52 lakh. Also, if they don't have any other source of income and are above 60, this entire income will be tax exempt as this is below the tax exempt limit (Rs. 3 lakh for those above 60 years of age and Rs. 5 lakh for those above 80 years of age).
Buy your parents a health insurance
You can claim a deduction of up to Rs. 25,000 against the medical insurance premium paid for yourself, your kids and spouse. But you can also get an additional deduction of Rs. 30,000 for paying the health insurance premium for your parents, if they are above 60 years of age. In total you can claim Rs. 55,000 as deduction against health insurance premium paid for your family.
Investing through family members
You can gift money to your parents as no tax is levied on gifts made to family members. Also, the rule of clubbing of income will not be applicable in case of your parents and adult child (above 18 years of age). So if you invest in your parents or adult child's name, then the gains or interest earned on investments will not be clubbed with your income. If your parent's income is below the overall exemption limit or if they fall in the lower tax bracket, you can save some taxes. Similarly, if your adult child is unemployed or falls in lower tax bracket, you can save tax.
Also, if your spouse is a homemaker, you can gift her some cash. No gift tax will be levied but there is a provision of clubbing of income. The gains or interest income that your spouse will earn on investment will be clubbed with your income. But if your spouse invests the money in tax-free instruments like PPF, then tax can be saved.
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