Once again, most of you all might have filed in the Income Tax returns but still at the back of the mind wished that you could have paid less taxes or to save more for the upcoming year.  People falling in the high income group often  miss out on some of the lesser known tax planning strategies which could substantially reduce their tax liability.

(1) Gift or Loan to Major Children

– Avoid investing the amount in your own name as it will attract tax, rather gift the surplus to your major children. The interest earned on this investment shall be exempted up to the basic exemption limit in the hands of your major children.  Also, do not forget to file income tax in their name for better tax-planning.

(2) Create ‘Trust’ for your Minor Child

– Clubbing provisions will apply in the case of gift to minor child. Therefore, create a “Specific beneficiary trust” , where no part of income should be spent on the minor child during the period of minority. This technique will not attract clubbing of income of a minor child with that of the parents.

(3) Stamp duty and Registration fee deduction

– You can claim deduction in respect of stamp duty and registration charges paid for acquiring the house. The deduction is allowable in the year of house purchase provided the house is in your possession.

(4) Set off Capital losses against gains

– Most of the times, people do not show their losses in tax returns and miss out on opportunities of setting them against capital gains. So, if you have made a profit of Rs. 5 lakhs on real estate property and Rs. 1 lakh loss on stock holdings than the long term capital gains tax after indexation will be Rs. 80,000 (20% tax) instead of Rs. 1 Lakh.

(5) Joint-ownership of property

– Always buy a home in joint-ownership with your spouse or parents as this will ensure that maximum tax advantage is reaped out by all the co-borrowers.

(6) Buy Health insurance for your child

– When you take health insurance for your child, you can claim the premium paid as a deduction from your income.

(7) Home Loan and HRA

– If you are not residing in a rental accommodation due to valid reasons and own a home in your name, then you can claim both  exemption to the full.

(8) Second-home owners

– The interest paid for the loan borrowed for buying a second home can be claimed in full as a deduction. Also, you can decide on which house needs to be chosen as self-occupied, so that you can take an advantage of lowering the tax.

Source: InvestmentYogi is one of the leading personal finance websites in India

(Article was First published on 12.03.2014 and republished with amendments)

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0 responses to “Income tax saving investment options”

  1. midhun says:

    dear sir,
    please send me plans for how can a assesee having income under head pgbp can minimise the tax

  2. Chidambaram says:

    Sirs, Please explain in detail regarding new tax saving of extra 50,000/- towards contribution in NPS (for other than Central Govt employees).

  3. bharat says:

    Dear Dinesh ji

    yes partnership firm can also invest in Mutual Funds.

    Bharat Singhal AFP
    Mob :- 8467847063

  4. Dinesh Thaker says:

    Whether a Partnership Firm can Invest in a Mutul Funds Tax Saver Scheme and take exemption from its Taxable Income? If yes, upto how much amount?

  5. C K MAKKAR says:

    How a gift or loan to a major child can save income tax. Please substantiate.

  6. avdhesh sharma says:

    how can save tax by loan or gift to major child. kindly explain it

  7. Aditi says:

    Point No.7 is wrong, it should be if you are residing in a rental accommodation due to valid reasons and own a home in your name, then you can claim both exemption to the full.

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