Marriage is a long-term commitment. Having a life-partner is about sharing responsibilities and handling challenges, including financial ones, together. With time, you will learn to bond with your partner and share life’s pains and pleasures with them. Part of this progression should also include learning to manage financial challenges. From paying home loan EMIs (EMI) to protecting the family with a health insurance plan, a working couple can financially support each other in many ways. Likewise, they both can help each other in dealing with a crucial aspect of personal finance: taxation.
Here are a few ways through which a couple can help each other in saving tax.
Joint Home Loan
If you both have aspired to home ownership, taking a joint loan will help you both enormously. It would not only improve your chances of getting a big-ticket loan but you both can avail a higher combined tax concession. You can claim tax deductions under various prescribed sections of the Income Tax Act. For example, Section 24(b) can help you both avail deduction for an amount up to Rs. 4 lakh on the interest paid for the home loan. So, individually you both can avail tax deduction benefit of Rs. 2 lakh on interest payment if you co-borrow the home loan in the 50:50 ratio. Similarly, under Section 80C, each of you can avail tax benefits of Rs. 1.5 lakh on the principal amount repaid. Therefore, together you both can avail tax benefits of Rs. 7 lakh on taking a joint home loan for a self-occupied property. What is also interesting here to know is that as per the BankBazaar Moneymood 2020 report, women out-borrowed men in the home loan category. The average ticket size for women (Rs.25.64 lakh) was higher than men (Rs.23.66 lakh).
Buying a health insurance plan is a wise way to save yourself and family from rising healthcare costs. Purchasing a health insurance plan for yourself, children, parents and spouse can help you avail tax benefits under Section 80D. You can avail tax benefits for the premium amount up to Rs. 25,000 for a health insurance policy for yourself, children and spouse. You can buy these policies individually or have a joint, family floater plan that covers everyone.
Buying A Life Insurance Policy
Getting married is about taking vows to protect each other for unexpected eventualities. A life insurance policy financially protects your family in the unfortunate event of your demise. As a couple, you can jointly buy a life insurance policy. You would not only get a life insurance policy at a lower premium but also be able to avail higher tax deductions for the premium paid. You both can individually claim a deduction under Section 80C of the I-T Act for the premium paid for a life insurance policy. The individual premium for a joint life insurance policy is calculated based on the age for husband and wife.
Investment As Per The Tax Bracket
You should decide on your investment plan based on your tax bracket, which can help you save taxes. If your wife is in the lower tax bracket, you can consider fixed-income investments like a fixed deposit for her. If she is in a higher tax bracket, higher tax-saving investments should be made in her name. The basic idea should remain to reduce your household’s tax liability as per your incomes.
Besides the above provisions, a married couple can also save tax by claiming tax deductions for children’s education and investments. In the case of two children, each parent can claim deductions separately as per the prescribed rules of the Income Tax Act.
The writer is CEO, BankBazaar.com, India’s leading online marketplace for loans and credit cards.