Besides regular 80C Tax Planning one can opt for following solutions
Insurance premiums for parents
Paying for health insurance premiums for any dependent - your wife, children - and self can allow you deduction of up to Rs 25,000 under Section 80D. Through the premium payment for your parents, you can get an additional deduction of Rs 25,000. If your parents are senior citizens, you can claim a deduction of up to Rs 50,000.
For education loan taken for your children, you can claim tax deduction under Section 80E. Interest payment on education loan is entirely tax free for the relevant financial year. And there's no ceiling on the amount.
Gift money to parents and children for investment
You can gift a certain amount of money to your parents and they can invest it in a fixed deposit or other investment instruments. Irrevocable Gift of money at the hands of family members are taxfree. Your parents can avail further tax deduction by investing in instruments eligible for tax deduction under Section 80C.
Similarly, you can transfer the money to your non-minor children if they fall in a lower tax bracket than you to reduce tax liability.
Pay rent to your parents
If the house is owned or co-owned by the parents and you cannot be one of the co-owners then salaried individuals can avail tax deduction by paying rent to their parents if they live in their parents' home. The tax deduction can be availed in the form of HRA exemption benefit. The rental payment would be taxable in the hands of the parents as income from House Property. If you do not get HRA benefit, you can claim for tax benefit of rent paid under Section 80GG.
HUF (A legal way to save Tax):
Another way to save tax is by creating a Hindu Undivided Family (HUF). An HUF can be created by married Hindu individuals.
An HUF would include the creator, who is called Karta, and his or her family members. The advantage of an HUF is that you can split your income between two entities–yourself as an individual taxpayer and the HUF. This way, you can avail the same tax-saving deductions twice.
How to Plan your Tax Saving Investments for the year:
The best time to start planning your tax-saving investments is at the beginning of the financial year. Most taxpayers procrastinate till the last quarter of the year and end up taking hurried decisions. Instead, if you plan at the start of the year, you can make investments that can also help you fulfil your long-term goals.
Tax-saving investments should be used to build wealth as well, not only to just save tax.
Use the following pointers to plan your tax-saving for the year:
- Check the tax-saving expenses that you’re already making that you can claim.
This includes expenses like insurance premium, children’s tuition fees, etc
- Deduct this amount from 1.5 lakh to figure out how much to invest. The entire amount doesn’t need to be invested if expenses are covering it.
- Choose tax-saving investments based on your goals and profile. ELSS funds, PPF, NPS and fixed deposits are some of the popular options