While it is every citizen’s duty to pay their taxes in full and on time, there is also an obligation to save. The government in the form of tax deductions encourages taxpayers to save some something for a rainy day. 

When it comes to planning for tax saving, most are aware of the deductions provided under Section 80C through investments such as public provident fund (PPF), equity-linked savings scheme (ELSS), compulsory Employee Provident Fund (EPF) among others, but the dual benefit of tax deductions through insurance policies and risk cover is often neglected.  

There are a host of ways in which either through investing, saving or even gifting your parents, spouse or children allows for certain deductions.   

There are five ways in which your family members can help you in saving tax. Here’s how you can do it.

Loans: If your wife invests the money given gifted by you in a tax-free instrument like PPF, the interest income will be exempt. Another way is to give interest-free loan to your wife to lower your taxable income. Clubbing of income allows an individual to be taxed in respect of the person which is clubbed in his hands.

Children education: Taking an education loan for your child will make you eligible for income deductions under Section 80E on repayment of interest for up to 8 years from the date of commencement of interest repayments. One can also give an interest-free loan to their children to reduce their taxable income.

Investing on behalf of your family: Certain investments such as PPF, ULIPs, mutual funds, insurance plans made in the name of your children will be eligible for tax deductions. However, it is to be noted the income will be clubbed with yours and taxed accordingly. To avoid this investments can be made in tax-free PPF or even equity mutual funds if gains are less than Rs 1 lakh a year. Opening a savings account for your children then interest income of upto Rs 1,500 per child for upto two children will be tax-exempt under Section 10(32).

Paying rent to parents: If a taxpayer pays rent to his parents, the same can be availed for deductions. However, in such a case rental agreement, bank statements of pavements and intimation of housing society might be required.