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Your spouse can be a vehicle for tax savings

Your spouse not only helps you in meeting your social and personal 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.

Expenses incurred for your children

As per the income tax laws you can claim 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 upto an amount of Rs. 1.50  lakhs  in a year along with other eligible items like PPF, ULIP and PF etc. under Section 80C.  Since this allowance is available in respect of two children  only and  if there are more than two children, the other spouse can claim these expenses for additional two more children  as the limit of two children  is qua a ta payer and not qua a family. Even in cases you do not have more than two children but  the expenses per year exceed Rs. 1.5  lakhs in a year these expenses can be bifurcated between two parents a to maximise the claim amount as a family.

Medical Insurance

Section 80D 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 has gone up even the  limit of Rs. 15,000 is not sufficient enough for the whole family.  Moreover this limit of Rs. 25,000 includes a sub limit of Rs. 5,000  for preventive health check up, the effective limit available for health insurance premium comes 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  can not be claimed under Section 80 D in most of the cases where only one spouse is working. However in case your other wife is also working, the health insurance can be bought in such a way so as to ensure that both the spouse are able to claim the fullest benefits of Section 80D while ensuring that the entire family has adequate health insurance  cover.

For home loan

Section 80C of the income tax act allows an individual and an HUF to claim deduction on 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 home loans taken, the amount of principal repayment itself  exceeds the maximum limit of Rs. 1.50 lakhs.

Effectively most of the home loan borrowers are not able to claim the full benefit of home loan repayment under Section 80c. In such cases if only one spouse is working, the benefit in respect of such overflowing items gets lost. However in case the other spouse is also working, the home loan repayment can be claimed by both of them if they are joint owners and co-borrowers.  With restriction on set off of losses under the head income from house property against other incomes only upto Rs.two lakhs, it makes sense for both the spouses to become joint owners and co borrowers to become eligible to claim this benefit of set off of  upto Rs. 2 lakhs in each spouse’s ITR.

Benefits in respect of house property

As per the present scheme of the taxation of income from house a person is allowed to have one property for self occupation and thus does not pay any tax on that. However in case one owns and uses more than one property, the owner has to offer notional rent in respect of such additional property for taxation though he has not received any rent. In case other spouse is also earning the additional property can be had in his/her name and thus between husband and wife two properties can be treated as self -occupied the need to offer any amount of notional rent for taxation.

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. He can be reached at jainbalwant@gmail.com

Categories: Income Tax

View Comments (2)

  • Is it compulsory to have a component named HRA (House Rent Allowance) in the Salary to claim exemption of Income Tax? If yes, is there any minimum amount or %age specified? Please clarify.

  • Developer of Housing Society has taken possession of my flat for redevelopment of Society building who is paying me online Rs.20000/- p.m. i.e. Rs.2.40 lac p.a. towards compensation of rent. Work of plinth is on progress. My annual income from pension plus Bank’s Deposit Interest in my name plus on wife’s name will be Rs.6 lac in current financial year. I am filing IT Returns till now including income of my wife from earning interest. Now my son from USA has sent Rs.50 lac in saving account of my wife in April 2018 for purpose of expected maintenance and repair expenses of flat in the name of my wife, Medical Expenses of my wife and myself and medical/living expenses of my my two major kids. One of these kids is dependent daughter and minor grandson( No personal income of daughter and grandson). While other kid is major earning son but his income is insufficient to meet his cancer treatment. Wife will earn Rs.200000/- extra income this year from Bank interest on Rs.50 lac plus Rs.2 lac from rent of flat. I have following question.
    1. May I claim Rs.2.40 lac income received from Developer under IT Act Sec 56 and same amount deductible under Sec 57(iii) so as to save income tax.
    2. Should I file separate IT return of myself and wife separately to save income tax.
    3.Is their Gift Tax on amount Rs.50 lac received by my wife from his son for purpose stated above.

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