Some such expense and investment areas that allow you to claim tax benefit include the following:
1. Tuition fees: Amount paid towards tuition fees in actua of 2 dependent children pursuing studies in school, college or universities can be deducted u/s 80C to a maximum of Rs. 1Lakh. Further, each of the parent share a separate limit and can claim the deduction in respect of tutition fees paid for a maximum of 2 children.
2. Interest on education loan: Interest on education loan taken for pursuing any full time graduate course is fully deductible as per section 80E. So, your income gets deducted by the interest amount paid towards the education loan which thus lowers your taxable income.
3. Premium for health insurance: Section 80D allows deduction in respect of health insurance premium paid for purchasing health insurance plan for your children to a maximum of Rs. 15,000.
4. Expenses on ailment and treatment of disabilities: For the amount incurred on medical expenses either for treatment of some illness or disability, taxpayer can claim deduction under two sections.
I) As per the provisions of Section 80DD for the expenses incurred towards the treatment of a disability, a maximum of Rs. 50,000 can be claimed as deduction from the income in case of normal disability which is impairment of a minimum of 40% of the body functionality and Rs. 1 lakh in case of severe disability that results in the impairment of 80% or above.
II) Section 80 DDB allows deduction for medical expenses incurred for treatment of some select illness to a maximum of Rs. 40,000.
5. Investment income from investments made in child's name is clubbed with parent income. And income thus generated to the extent of Rs. 1,500 can be claimed as deduction. Such a deduction can be claimed for a maximum of 2 children. Such a provision could be used to claim deduction or avail tax exemption when the returns are at par with the maximum limit set.
6. Trust in child's name can also be used for saving tax: An irrevocable trust created in child's name can be used to save on trust. Any investment made through the trust and income generated through it cannot be clubbed with the total income. Trust formed is liable to pay tax on the income generated.
7. Different allowance are also allowed for tax deduction: Several allowances provided for expenses of different type on maximum 2 dependent children can be claimed as deduction. Such allowances include hostel income, education allowance with some specific limits. Medical expenses can also be claimed as deduction by producing medical bills to the concerned authority to a maximum of Rs. 15,000/- on an annual basis.