Health insurance for parents
An individual can buy health insurance for parents and save taxes. Investors can avail of income tax exemption under Section 80D, based on the premiums paid on these policies.
“Section 80D of the Income Tax Act, 1961, allows investors to deduct up to Rs 25,000 paid towards the premium of a health insurance policy every year. If your parents are senior citizens then by paying their insurance premiums one can get tax deductions of up to Rs 50,000 a year,” says Archit Gupta, founder & CEO, ClearTax.
Education loan for children
Interest on education loan taken for higher education for kids is also permitted as a deduction, suggests Aarti Raote, Partner, Deloitte India.
The deduction allowed in this case is the total interest part of the EMI paid during the financial year. There is no limit on the maximum amount that is allowed as deduction.
“One just needs to cautious in respect of assets acquired or investments made in the name of spouse or parents as on account of clubbing provisions the income is bound to get taxed in the hands of the tax payer who has invested the funds,” adds Raote.
Gifting money to parents
Gifting money to parents is tax-free, and parents can invest this money in schemes such as Senior Citizens’ Savings Scheme (SCSS) and bank FDs to earn better returns.
“By doing this, a much higher return can be earned from schemes that are exclusively for senior citizens,” says Gupta.
Paying rent to parents
Salaried individuals can also save tax by paying rent to their parents and availing the House Rent Allowance (HRA) exemption benefit. However, the individual should not be the property’s co-owner.
Owning property jointly with spouse
Purchasing property jointly has huge tax benefits among others. If a spouse is included as a co-owner of the property, it magnifies the loan eligibility.
"The ambit of the tax benefits increases for both husband and wife towards interest on borrowed capital and principal repayment under section 80C of the income tax act," explains Gupta.
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