Tax Benefits for Married Couples

Tax Advantages During Marriage

• Tax-Free Wedding Gifts: Gifts received from immediate family for your wedding are exempt from income tax under Section 56 of the Income Tax Act.

• Personal Expenses Are Exempt: Wedding expenses are considered personal expenditures which are not taxable.

11 Best Ways to Save Income Tax After Marriage

Your spouse can help you increase your income tax savings through various legal strategies. Let us learn about them from the top 11 ways mentioned below:

1. Joint Home Loan:

   If you and your partner are buying a house, you can consider getting the loan together. This way, you both get to enjoy the tax benefits. Each of you can claim up to ₹1.5 lakh for the principal repayment under Section 80C and up to ₹2 lakh for the interest paid under Section 24(b).

   • Example: If both of you take out the loan, you could potentially claim a combined tax deduction of up to ₹7 lakh in a year.

2. Separate Investments:

   It’s smart to make individual investments in tax-saving schemes like PPF, ELSS, or NSC. This way, both of you can take full advantage of the Section 80C deductions.

   • Example: If you each invest in PPF, you can both claim ₹1.5 lakh, adding up to ₹3 lakh in deductions.

3. Health Insurance:

   You can buy health insurance policies separately to claim individual deductions under Section 80D.

   • Example: Each of you can claim up to ₹25,000 for your own health insurance and an extra ₹50,000 for your parents if they’re senior citizens.

   

4. HRA Benefits:

   If one of you owns a house, the other can claim House Rent Allowance (HRA) by paying rent to the homeowner spouse. This helps in reducing taxable income under Section 10(13A) of the Income Tax Act.

   • Example: If the husband owns the house, the wife can pay him rent and then claim HRA deductions on her income.

5. Joint Ownership of Property:

   Owning a rental property together means you can split the rental income, which might lower the tax you both need to pay under Section 22.

   • Example: If you both co-own a rental property, dividing the rental income between you can reduce your tax burden since the income is taxed at lower individual rates.

6. Gifts and Inheritance:

   Gifting assets like shares or property to your spouse is tax-free under Section 56(2)(x), which can help you manage taxes on capital gains.

   • Example: If a husband gifts shares to his wife, any gains from those shares would be taxed at her rate, which might be more favorable.

7. Utilize Tax Slabs:

   Make sure both of you are making the most of your individual tax slabs by dividing income-generating assets between yourselves.

   • Example: If one of you is in a lower tax bracket, transferring some interest income to that person can help reduce the overall tax you both pay.

8. Children’s Education Expenses:

   You can each claim up to ₹1.5 lakh for your children’s education under Section 80C. This can apply to the education costs of up to two children per parent.

   • Double Deduction: Both parents can claim, doubling the benefit to ₹3 lakhs.

   • Tip: Split educational expenses between parents to maximize tax savings.

9. Leave Travel Allowance (LTA):

   Both of you can claim LTA benefits under Section 10(5), which means you could have up to four tax-free trips in a four-year block, two each.

   • Tip: Plan your vacations wisely to use up the LTA allowance, or you might end up paying tax on the unused amount.

   

10. Life Insurance Policy:

    Each of you can claim deductions for life insurance premiums under Section 80C, and there are also benefits under Section 10(10D) for different types of insurance policies.

    • Tip: You can deduce up to ₹1.5 lakhs from your taxable income for your premiums paid in best investment plans like ULIPs, pension plans, or child plans. You can also get a tax-free maturity amount on these policies if your annual premium paid is below ₹2.5 lakhs.

11. Tax File through Gift/Loan:

    If one spouse gifts a large amount to the other, any income generated from that money will be added to the giver’s income for tax purposes under Section 64(1). However, if the recipient reinvests that income, any additional earnings will be taxed separately as their own income.

    • Secondary Investment: If a husband gifts ₹10 lakh to his wife, and she earns ₹1 lakh from it, that ₹1 lakh will be taxed as the husband’s income. If she reinvests the ₹1 lakh and earns ₹30,000 more, that ₹30,000 will be taxed as her income.

In Conclusion

Married couples in India can save on taxes by planning their finances wisely. By sharing home loans, combining deductions, and investing in the best investment plans, they can lower their tax bill. This approach not only saves money but also helps them manage their finances better together.