Investing in family members can help individuals significantly lower their tax outgo while filing Income Tax Return (ITR). Those interested in this benefit have to file their ITR under the old system, where investors can claim tax deductions can on a wide range of investments under Income Tax Rules.

So, your parents, children and spouse can actually help save more tax for you. For such tax benefits, however, investments are necessary. Some investments like education loan and medical insurance will help significantly you lower your tax outgo. Here are some ways where family members can help you save more tax:

Saving tax through medical insurance

Individuals can save a decent amount of tax through parents, spouse and children. If you are married, parents-in-law can also help you save more tax too. The simplest method to save tax is by buying health insurance for them. Investors can easily avail tax exemption for medical insurance under Section 80D of the Income Tax Act. The tax exemption will be based on the premiums paid on health insurance policies for parents.

Under Section 80D of the I-T Act, an individual filing income tax can claim a deduction for medical insurance premiums paid from their total income annually. Besides purchasing a health plan for themselves, individuals can also benefit from buying an insurance cover for their spouse, children and parents. Further deductions can be claimed under Sections 80C/CCC/CCD.

An individual is allowed to claim a deduction of up to Rs 25,000 for insuring themselves. They can claim a similar amount for their spouse, parents and dependent children. The amount for parents goes up to Rs 50,000 if they are aged above 60 years. If the insurance amount does not add up to the maximum deduction limit, individuals can even include medical bills for preventive health checkups.

Education loan for child/children

Educational loans availed for the higher education of children also qualify for tax deduction benefit. For such loans, there is a tax benefit on repayment under Section 80E of the Income Tax Act.

Once an individual takes an educational loan for his/her child, the interest paid on the education loan qualifies for deduction under Section 80E of the Income Tax Act.

The deduction benefit is available for a maximum of eight years or till the interest is repaid, whichever is earlier. It may be noted that the tax benefit can be claimed either by the parent on the child, depending on who repays the education loan. However, individuals should not that the tax deduction is only available when the education loan is taken from qualified financial institutions, not family or relatives.

Taxpayers can claim the deduction for the year when they start repaying the interest of the education loan. The good part is there is no limit for claiming tax deductions on interest paid towards educational loans. Simply put, there is no cap on the upper limit, like in Section 80C and Section 80D. On an annual basis, if you repay Rs 1,00,000 or more towards interest for the educational loan, you can claim the entire amount under deductions to reduce your tax outgo.

Gifting money to your parents, children

It is always good to gift a portion of your income to your ageing parents. It will also help you save tax. In India, gifts from specific relatives like parents are exempt from tax. While your taxable income on an annual basis will not change due to the money you are giving away to parents, there will be no tax implications on the money they receive. Moreover, the parents or parents-in-law can use the money and invest it in tax-free schemes to further generate an income from it. Some schemes are free from tax in India, especially for senior citizens. So, any income they generate will not be taxed.

Owning joint property with spouse

Owning a joint property with your spouse can attract huge tax-saving benefits. Not only in the debt burden shared, but there are multiple benefits that one can claim when availing a joint home loan. Under Section 80C of the Income Tax Act, an individual can claim up to Rs 1.5 lakh on the principal amount, while Section 24 of the I-T Act permits an individual borrower a tax deduction of Rs 2 lakh on interest payment towards a home loan. However, when a couple jointly purchases a property, they can claim Rs 3 lakh benefit under Section 80C and Rs 4 lakh under Section 24. However, it may be noted that tax benefits under Section 80C cannot be claimed for an under-construction residential property.