A few smart ways in which working couples can save tax together

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There are millions of couples in the country who opt to work and save together. Here are a few tips that can help couples to save on tax through various measures and boost their income in hand.

Shifting income

Shift fixed income earning instruments to lower income earning spouse

Interest on fixed interest bearing instruments is taxable. So, you need to be astute in investing. Let us say that one spouse earns Rs 6 lakhs as taxable income by way of salaries and has another Rs 25,000 from interest on fixed deposits. Now, the total income would be Rs 6.25 lakhs. Out of this a sum of Rs 5 lakhs would come under the 10% tax bracket and the remaining Rs 1.25 lakhs in the 20% tax bracket.

Now, say another spouse earns an income of Rs 4.5 lakhs. Since, his or her income is below Rs 5 lakhs, he or she would come in the 10% tax bracket. If you move the fixed deposit to this partner the tax liability on the interest on fixed deposit would only be 10%, and not 20% as seen for the spouse earning Rs 6.25 lakhs in total.

Similarly, move income from other sources like rent to the lower earning spouse.

Take a joint home loan

To make use of the maximum tax breaks allowed take a joint home loan. This would ensure that both the spouses can avail tax benefits. Presently, interest on home loans is exempt up to Rs 2 lakhs, while the principal amount is exempt up to a sum of Rs 1.5 lakh under Sec 80C. Together, you can avail of tax benefits to the tune of Rs 7 lakhs, instead of Rs 3.5 lakhs individually.

Working couples and HRA

If couples are staying on rent what they could do is split the HRA. This would ensure that both can claim HRA benefits under SEC 80C of the Income Tax Act.

Smart use of LTA

LTA is exempt from Income Tax, to the extent of only the travel cost. The tax rules currently provide for an exemption only in respect of two journeys performed in a block of four calendar years. What couples could do is claim LTA benefits every alternate year, so they virtually have tax benefits from LTA every year between them. In all of the above, be honest enough with the tax authorities. For example, if you are claiming LTA make sure you have spent the same on holidays. So on and so forth.

Rental income

If both spouses are earning a salary income and also say an income like a rental income, it makes sense to show the rental income in the name of the spouse which has a lower overall income. However, he or she should also be a joint owner of the house.

Read more about: home loans, hra, lta
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