How married couples can save together on taxes

How married couples can save together on taxes
The provisions of deduction of tax at source apply to both but in some cases it is possible to save tax through proper tax planning. 
“Two are better than one” the saying holds all the more true when it comes to tax saving as a couple. Marriage bestows on you, among other benefits, the scope to save more money in taxes. We’ll look at how married couples can save together on taxes below. 

Investments by the spouse in the higher tax bracket

Where both the spouses are working, both could be making investments to avail 80C deductions. If deduction limits are not maxed out for both, it makes greater financial sense for the spouse with higher income to claim deductions. 

Take an illustration to understand this:

Say you earn Rs 3 lakhs and your spouse earns Rs 5.5 lakhs per year. You invest Rs 50,000 in PPF and claim deduction, which makes your net income tax exempt. Suppose your spouse gets some deduction on EPF but is unable to make any more investments to save tax. In this case your tax savings as a couple would be higher if your spouse invests Rs 50,000 in PPF and claims the deduction instead of you. That’s because higher the tax slab, higher the tax outgo, so better to lower the taxable income of the spouse in the higher tax slab. 
Now, this is assuming there is only so much money shared between both spouses to invest. If you can each allocate funds for investments, this concern is nonexistent, of course. 
Once you’ve exhausted all possible tax saving investment limits, you can still invest in your spouse’s name or child’s name in products like PPF. True, you won’t get tax deduction for those investments. But PPF interest is tax free, and that’s your chance to earn some more tax-free money! 

Make the most of home loan tax benefits

Buying a home of their own is a dream shared by most urban Indian couples. And when the buying is funded by a loan there are associated tax benefits too. Couples who go for joint home loans can each claim tax deduction on the principal upto the limit allowed under section 80C. That is, they can each claim upto Rs 1.5 lakhs on the loan they’re paying from a joint account. Similarly they can both set off interest against income from house property upto the limit allowed under section 24. 
For availing tax benefits on a joint home loan, both spouse should have proportional ownership in the house. So if both of you wish to claim 50-50% of the EMI then the ownership too must reflect a 50-50 share. 

Go on trips and claim LTA every year

Leave Travel Allowance rules permit claiming of the benefits twice in a block of four calendar years. As a couple you can actually travel and claim LTA benefits every year. You can each take turns to claim the benefit in alternate years. 

HUF to save tax for non-salary income

If you are married then you can save additional tax, over and above what is deductible by both couples individually, by creating an HUF. You can form an Hindu Undivided Family (HUF) and move income generating assets like rental property to it. HUFs have the same deductions as individuals so by transferring assets to HUF, you reduce the overall tax outgo as a household, by claiming them in your individual capacities as well for the HUF. 

Here’s a quick example:

Your salary income is Rs 10 lakhs and you also earn rental income of Rs 3 lakhs. Your taxable income is Rs 10.5 lakhs with the standard exemption of Rs 2.5 lakhs (assuming no deductions claimed for the sake of simplicity). On the other hand by forming an HUF, only Rs 50,000 of the rental income is taxable, as Rs 2.5 qualifies for the standard exemption. So your net taxable income is down to Rs 8 lakhs. 
These are some of the most common ways couples can reduce their tax liability with some planning. Hope you find them useful.

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