6 tax-saving tips for working couples

We are just a few months away from the financial year end, and most of us have by now started this year's tax planning.

For a working couple, an efficient tax plan can be achieved by jointly making use of their dual income to invest, and the income tax rules to their advantage. Here are six smart tips from Investment Yogi, to help couples save more and maximise wealth.

1. Using investments efficiently

If spouses fall in different tax brackets, it is advantageous for the spouse in the higher tax bracket to claim deductions from the tax-saving investments, which the couple has invested in together.

For example, let us consider the case where both spouses make investments for a tax deduction of upto Rs 1,00,000, respectively. In case one of the spouses has insufficient investments to fully meet his limit of Rs 1,00,000, then the investments made should be used for a claim by the spouse earning more. In this way, a lesser amount of his salary will be attracting the high tax bracket rate.

When seeking a home loan, it is advantageous for couples to opt for joint loans. By this, spouses can individually claim a maximum deduction of Rs 1 lakh on the principal repayment and Rs 1.5 lakhs on interest payment, for the same home loan.

Thus, together the couple gets to claim Rs 2 lakh principal repayment and Rs 3 lakh interest repayment. The income tax benefits are applicable in proportion to the ownership structure.

For example, if the ownership in a property is 50:50, the loan amount will split accordingly and this ratio will be applicable while calculating tax benefits on interest/principal repaid on this loan.

It is advantageous to make use of one's house rent allowance (HRA) as it is partially exempt from tax, provided rent is actually paid.

If, one of the spouses owns the house, the other spouse could pay rent to him/her, to claim HRA, thereby reducing his taxable income.

If the couple resides in a rented house, the HRA exemption for the rent paid can be shared by the couple.

As per the current rules, LTA benefits can be claimed twice in a block of four calendar years.

While claiming LTA (Leave Travel Allowance), spouses should claim exemption alternately each year. This way, together they can claim an LTA exemption of four journeys in a block of four years.

There is no need for them to take the precaution of not travelling twice during the same year.

Have you and your spouse received gifts that are considered taxable?

Then starting an HUF can prove to be quite a saving. Any income received by an individual as a member of a HUF (Hindu Undivided Family) is taxable only in the hands of the HUF and not in an individual capacity. The HUF income has the same slabs and exemptions as for an individual.

Thus, through an HUF, couples can get an additional, separate exemption of Rs 1,60,000.

Spouses can get additional exemptions by creating a trust as per section 164 of the Income Tax Act.

A private trust can be created for an unborn son or daughter, or for the future spouse of an existing son or daughter, by allocating funds to the trust through transfer of property, rent of which shall be income of the trust.

To conclude...

The Income Tax department gives us various avenues to help save tax. Optimally using these avenues and structuring finances sure does provide a great deal of monetary gain.