Your spouse not only helps you in meeting your social and personal obligations, but also helps you to save income tax. There are certain tax benefits with which you can improve your tax savings through your spouse. Let us discuss some of the important provisions.
Expenses incurred for your children
Currently, Indian Income Tax Laws allow you to claim a deduction for the education expenses incurred in any university, college, school, or educational institution in India with respect to full-time education for two children, under Section C, with an amount of up to 1.50 lakh in a year. This discount is available along with other eligible items such as PPF, ULIP, PF, etc. Since this benefit can only be claimed for two children, if there are more than two children, the other spouse can also claim these expenses for two additional children. This benefit can only be claimed for two children as the limit of two children is applicable for a taxpayer and not for a family. In case you not have more than two children, but the educational expenses of your children exceed the limit available under Section 80c, these expenses may be divided between parents in a way to maximize the amount of the claim.
Section 80D allows individuals and HUF to claim a deduction up to Rs. 25,000 for health insurance premiums for you and your family. However, the actual cost of purchasing a health insurance policy is very 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. 25000 is available under Section 80D which includes the sub-limit of Rs. 5000 for the preventive medical examination, the actual limit available for the health insurance premium is reduced to Rs 20,000 in the event that you benefit from the tax benefits of the preventive medical examination. The health insurance premium paid above these limits cannot be claimed under Section 80D in most cases if the only spouse is the taxpayer. However, in the event that your spouse is also a taxpayer, health insurance can be purchased in a way that ensures that both spouses can claim the maximum benefits possible under Section 80d while ensuring that the entire family receives appropriate health insurance cover.
Leave Travel Allowance (LTA) benefits
A person can avail of the LTA advantage of two journeys during a four-year block period. However, if both spouses are employed, they can both claim LTA for four employed that take place during the four-year period, and therefore they can go on vacation every year during the four-year period. There is no absolute discount limit for LTA.
Section 80c of the Income Tax Act allows the individual and the HUF to claim a discount for some items that are almost mandatory in nature, such as life insurance premiums, savings fund, and loan repayment against the place of residence. With the increase in real estate prices and the consequent improvement in the mortgage, the principal repayment amount exceeds the maximum available limit of Rs. 1.50 lakh in most of the cases. As a result, most mortgage borrowers are unable to claim the full benefit of paying off the mortgage loan available under Section 80c. In such a case, if only one of the spouses works, the benefit is lost in connection with this overpayment of the mortgage loan. 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 spouses are joint owners and co-borrowers as well.
Currently, all taxpayers can claim interest on home loans of up to Rs. 2 lakh in respect of property used for self- occupation. Therefore, in the case of a shared home where the mortgage loan is taken in a common name and served by the couple, they can both claim the deduction of Rs. 2 lakhs each under Section 24(b). Also, there is a limit of Rs. 2 lakh each year to compensate for losses under the head "income from homeownership" versus other income. Therefore, it is reasonable for both spouses to become co-owners and co-borrowers so that both are eligible to claim compensation benefits of up to Rs. 2 lakh in each spouse’s ITR for interest paid on the home loan. In case the property is let out, the limit of Rs 2 lakh will be applied after internally setting off the taxable portion of the rent received.
Investments in equity
As per Section 112A, a person can claim an initial exemption of up to Rs. 1 lakh on long-term capital gains arising from the sale/transfer of listed equity shares or capital-oriented schemes every year provided Security Transaction Tax (STT) has been paid. Since this exemption can be claimed by each taxpayer, investments can be made in the name of both spouses to take advantage of the exemption every year, whenever possible.
It is clear from the above discussion that although at present there are no-no separate tax benefits available to the working spouse,the working spouse can take advantage of the current provisions of the existing provisions of tax laws to minimize the overall tax liability of the family as a unit.
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