TAX SAVING FOR FREELANCERS, PROFESSIONALS, TRADER & WEB BASED AGENCIES

How your family can help in tax savings

How your family can help in tax savings
Your family is always there to give you support -- not just emotional, but sometimes financial as well. For instance, your family members can be of great help for saving on taxes. However, all your investments and spending for your family are not eligible for tax rebates. There are rules and some of them are pretty complex.

Buy health insurance for the family:

A medical insurance is a necessity that helps you save taxes. If you buy it only for yourself, you can save up to Rs 15,000, but if you buy it for the whole family (including your parents), you can save up to Rs 40,000. 
Under Section 80D, a deduction of Rs 15,000 can be claimed for the health insurance premium and preventive healthcare check-up costs for yourself, spouse and your children.

Invest through your spouse:

Gift some money to a non-earning spouse and invest that in a tax-free instrument. There is no upper limit to the amount you can give as your spouse is in the list of specified relatives whom you can gift any sum without attracting a gift tax. However, the taxman is not foolish. If you invest the gifted money, the Section 64 of the Income Tax Act, a provision for clubbing income, comes into play.

Loan money to spouse:

Another way to avoid tax is by showing the monetary transaction as loan. So, for instance, if you buy a house in your wife's name or transfer the second property to her, the rental income from it will not be treated as your income if she pays you a nominal interest on the loan. She can also transfer her jewellery worth the value of the property in your favour. Then also the rental income from that house would not be taxable to you.

Children can help as well:

You must be already claiming a deduction for the education fee of your children. You can also gift your minor child some cash. But if you plan to invest that amount, the income will be clubbed with that of the parent who earns more. 

To avoid clubbing of your child's income, you may invest in tax free instruments such as PPF, mutual fund (MF) or ULIP. Open a minor PPF account in the name of your child and it won't be taxable.

Adult children can be big tax saver:

The clubbing rule does not apply once the child turns 18 and the person will be treated as a separate individual for all tax purposes. This means, you can transfer money to a major child and have another 2 lakh exemption limit along all the exemptions and deductions any other taxpayer enjoys. So you can freely gift him any amount of money and invest it for tax-free gains.

Pay rent to your parents:

If you live with your parents, pay them rent and claim your HRA. However, the house should be registered in their name for you to make this claim. Your parents will be taxed on this. They can claim a flat 30% of the annual rent as deduction is for maintenance expenses such as repairs, insurance, etc., irrespective of the level of actual incurred expenditure.

Tax saving for Freelancers, Professionals, Trader and Web based agencies

10 mins of consultation. Place a request.

Some of the featured articles from our knowledge center

Business2 13a51fd54d37dfeead10bd04c34a46671e69097acf6d8002d2665eb06b5cf58f
What is the income tax payable on partnership firm

As per section 4 of partnership act 1932, partnership means the relationship between the person who are agreed to share the profits of business car...

Business3 1835184f1312bba0b871fddd223a24dd62299180ed03a78d9e4098813c851963
What is business income on presumptive basis under section 44ad and 44ada

As per section 44AA income Tax act 1962, every person who is carrying on business or profession is required to maintain books of accounts. However,...

Business1 8b8cee9b60a38e9df92fb5b897e7c09195532b3d70b7ec28803a600cf2ce60cd
What is GST and different types of GST forms

The Prime Minister approved “The constitution amendment bill for Goods and Service Tax”(GST) in the Parliament Session (Rajya Sabha on 3 August 201...