Family members not only provide emotional support, but also financial support in many circumstances. For example, there are several ways in which your family, whether it be your parents, husband, or children, can assist you in reducing your tax liabilities.
Here are seven strategies to save money on taxes for your children via spending, investing, and saving.
Set up a bank account.
If you open a savings bank account for your child, the interest income would be tax-free up to Rs 1,500 per child each year for a maximum of two children (32). If you have two children, you can save up to Rs 3,000 in taxes.
Invest in your child’s future.
You can invest for your child to get the entire exemption if you haven’t reached the Section 80C limit of Rs 1.5 lakh per year with your investments. You can invest in PPFs, Ulips, mutual funds, and some classic plans, for example, but keep in mind that the income from these will be added to your income and taxed at the appropriate rate.
This can be avoided by investing in income-tax-free products such as the PPF or equity mutual funds, where profits are not taxed if they are less than Rs 1 lakh per year.
Invest in the names of your adult children.
If your child is an adult (over the age of 18), the income he generates from his investments will be taxable in his hands and will not be combined with your income to be taxed at the appropriate rates. So, if his net wages and income are below the taxable limit, you can avoid tax on his investment income if you give him money to invest.
Make a tuition payment
If you have school-aged children and have not yet reached the Section 80C deduction limit, you can deduct the tuition charge from the total school fees you pay for them. Section 80C exempts up to Rs 1.5 lakh in tuition fees paid for up to two children in a year from taxation.
Take education loan
If you take out a loan for your child’s higher education, the interest you pay on the loan will be tax deductible under Section 80E for the first eight years of repayment.
Purchase health insurance.
If you get health insurance for your children, the premiums paid up to Rs 25,000 per year are tax deductible under Section 80D, which also includes up to Rs 5,000 in preventive health check-up charges.
Disabled children get a break.
If you have a kid who is differently abled or has a certain ailment, you can claim a deduction for medical expenditures under Section 80DDB. In the event of an illness, you can claim a deduction of Rs 40,000 or actual expenses, whichever is less.
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