In this article, we are going to talk about the following easy tax saving tips that you might not be aware of.
You can gift money to your major children
One of the best ways to save taxes is by gifting money to your major children. For instance, let’s assume you have Rs. 20,00,000 that you want to invest in a bank FD. What you need to remember is that this will generate an annual income of approximately Rs. 1,60,000 at an interest rate of around 8% per annum. This amount will be added to your salary income and would be taxable. Now, here’s something interesting you can do to save taxes. Let’s assume that you have two major children. You can gift this Rs. 20 lakhs to them by either dividing it equally among them or give to one of them. In this case, the Income Tax authorities will not consider any income, which results from investing this amount as your income. Hence, it would be taxable at your end. Moreover, after adding interest income from FD, if your children’s income is below the minimum exemption limit, they will also not have to pay any tax.
If you are not comfortable gifting the money to your children, the other option you can think of is to provide an interest-free loan to them. Even in this case, if your children invest that money in FD, income generated will be considered their income and not yours. Therefore, you need not pay any taxes on that income. Please note that children must be major and you cannot gift money to your wife and avail this tax advantage. Thus, don’t stop investing by worrying about taxation from returns.
You can claim stamp duty and registration charges under section 80C
Generally, when you invest your money in a property, you will pay stamp duty and registration charges. The income tax authorities have given you the provision to claim that money under sec 80C. A lot of people are not aware of this and hence do not claim this. You can claim this money under 80C in the year you made the payment. For instance, if you bought a flat in 2016 and have paid Rs. 35,000 as stamp duty and registration charges you can claim this Rs. 35,000 under 80C. The only thing you need to remember here is that you can only claim this amount in the year of payment and your home should be under your possession since this is not allowed for under construction properties.
You can claim rent deduction even without HRA
If you are working in a company that does not provide you with HRA, you can still claim deduction under HRA. However, you need to know the following rules for claiming HRA in that scenario. The HRA you claim has rent paid after deducting 10% of your basic salary or Rs. 2000 per month or 25% of your income, whichever is the lowest. Please note that this is possible only if you are not getting HRA from your company or if you are a self-employed person. Many people are not aware of this so they do not claim HRA.
Make sure that you declare losses in your IT returns to save tax in the future
One of the best ways to save taxes is by setting off losses against your profits. Let’s assume you sold shares and incurred a loss of Rs. 2,50,000 in 2016. However, you also sold your real flat in 2016 and made a profit of Rs. 6,50,000. You can set off the loss of Rs. 2,50,000 against the profit of Rs. 6,50,000. Thus, your net taxable gain would be Rs. 4,00,000. Losses are classified into short-term and long-term capital loss.
Buy a property with your parents or siblings as the co-owners
You can have your parents or your siblings as the co-owner while buying a home. Therefore, not only you but your parents and/or siblings can claim tax benefits. Many people have a common perception that only a spouse can be a co-owner to claim income tax benefits.
Make use of education loan to lower taxes for you children in the future
Interest paid on education loan taken for your children’s higher education is allowed as a tax deduction. Therefore, even if you have the cash ready for your children’s education. It would be advisable for you to invest that elsewhere for better returns and go in for an education loan instead. You save taxes every year this way.
You can claim unlimited deductions for interest payment of your second home loan
In case you are planning to buy your second home, you can claim all the interest payments as deductions since there is no upper limit in this regard. Please note that it should be your second home.
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Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.