Your spouse not only helps you in meeting your social and personal obligations but also helps you in saving income tax as well. There are certain tax benefits by way of which you can enhance you tax savings through your spouse.
Let us discuss some of important provisions.
Presently Indian income tax laws allow you to claim a deduction for education expenses incurred in any university, college, school or educational institution in India in respect of full-time education of two of your children, under Section C, upto an amount of Rs. 1.50 lakh in a year. This deduction is available along with other eligible items like PPF, ULIP and PF etc.. Since this benefit can only be claimed for two children only and if there are more than two children, the other spouse can also claim these expenses for upto additional two children as the limit of two children is applicable for a tax payer and not for a family. Even in case you do not have more than two children but the expenses on education for your children exceeds the limit available under Section 80C, these expenses can be bifurcated between two parents in such a way so as to maximise the claim amount.
Section 80 D allows an Individual and HUF to claim deduction upto Rs. 25,000 for medical insurance premium for self and family. As the actual cost of buying a health insurance is so high that even the limit of Rs. 25,000 is not sufficient enough for the entire family to be adequately covered. As the limit of Rs. 25,000 available under Section 80D includes a sub limit of Rs. 5,000 for preventive health check up, the effective limit available for health insurance premium comes down to Rs. 20,000 in case you are availing tax benefit of preventive health check up. Health insurance premium paid in excess of these limits cannot be claimed under Section 80 D in most of the cases if only one spouse is taxpayer. However in case your spouse is also a taxpayer, the health insurance can be bought in such a way so as to ensure that both the spouse are able to claim the fullest possible benefits of Section 80D while ensuring that the entire family gets adequate health insurance cover.
A person can avail the benefit of LTA in respect of two journeys undertaken during a block period of four years. However if both the spouses are employed then both of them together can claim LTA for four journeys undertaken during the period of four years and thus can go on holidays for every year during the block of 4 years. There is no absolute limit on deduction for LTA.
Section 80 C of the Income Tax Act allows an individual and an HUF to claim deduction for certain items which are almost mandatory in nature like Life Insurance Premium, Provident Fund and repayment of housing loans With increased property prices and consequent enhanced amount of home loan one needs to take, the amount of principal repayment itself exceeds the maximum available limit of Rs. 1.50 lakh in most of the cases. This results into most of the home loan borrowers not being able to claim the full benefit of home loan repayment available under Section 80C. In such case if only one spouse is working, the benefit in respect of such overflowing home loan repayment gets lost. However in case both the spouses are earning, the deduction for home loan repayment of Rs. 1.50 lakh can be claimed by both of them provided both spouse are joint owners and co-borrowers as well.
Presently all the tax payers are allowed to claim interest on home loan upto Rs. 2 lakhs in respect of property used for self occupation. So in case of jointly owned house on which a home loan is taken in joint names and serviced by both the spouse, both can claim the deduction of Rs. 2 lakhs each under Section 24(b). Moreover there is a limit of Rs. two lakhs every year on set off of losses under the head ‘income from house property” against other incomes. So it makes sense for both the spouses to become joint owners and co borrowers so as to make both eligible to claim benefit of set off of upto Rs. 2 lakhs in each spouse’s ITR for interest paid on home loan. In cases property is let out, the limit of 2 lakhs will apply after internally setting off the taxable portion of the rent received.
As per Section 112A a person can claim an initial exemption upto Rs. 1 lakhs on long term capital gains arising on sale/transfer of listed equity shares or units of equity oriented schemes every year provided Security Transaction Tax (STT) has been paid. Since this exemption can be claimed by each tax payers, the investments can be made in the names of both the spouses so as to avail the benefit of this exemption every year as long as it is possible.
From the above discussion it become apparent that though presently there are no separate tax benefits available for working spouse, however a working spouse can still take benefit of existing provisions of tax laws to minimize overall tax liability of the family as a unit.
Balwant Jain is a tax and investment expert and can be reached on [email protected] and @jainbalwant on his twitter handle.