India offers numerous ways to save on income tax, some of which are less commonly known but can make a significant difference. Here are a few unusual and effective ways you might consider:
1. Rent Paid to Parents (HRA Exemption): If you live with your parents, you can claim House Rent Allowance (HRA) by paying rent to them. They need to declare this rental income in their tax returns, but this can be beneficial if they fall into a lower tax bracket or are exempt from taxes. This way, the family as a whole ends up saving more.
2. Setting up a Hindu Undivided Family (HUF) Account: If you belong to a Hindu family, forming an HUF can help you save taxes by splitting income among members. An HUF is treated as a separate entity for tax purposes, meaning it can claim basic exemptions and deductions independently.
3. Interest on Savings for Senior Citizens (Section 80TTB): If you are a senior citizen, you can claim a deduction of up to ₹50,000 per financial year on the interest income from bank or post office savings accounts under Section 80TTB. It’s particularly beneficial for retired individuals relying on savings.
4. Notional Rent on a Second Property: If you own more than one residential property, the government considers any additional house as rented and taxes a notional rent. To minimize this tax, you can consider keeping only one residential property in your name and transferring others to family members who may have a lower tax liability.
5. National Pension System (NPS) Additional Deduction (Section 80CCD(1B)): Most people know about deductions under Section 80C, but you can save an additional ₹50,000 under Section 80CCD(1B) by investing in the National Pension System (NPS). It’s a lesser-known way to expand your savings beyond the usual ₹1.5 lakh cap.
6. Tuition Fees for Up to Two Children: Section 80C also allows you to claim deductions on the tuition fees paid for up to two children. Many taxpayers overlook this benefit, but it can help families with school-going children reduce their taxable income.
7. Medical Insurance for Extended Family (Section 80D): If you’re paying for medical insurance for parents or even your in-laws, you can claim deductions under Section 80D. If parents are above 60 years of age, the additional deduction can go up to ₹50,000, further reducing your taxable income.
These approaches may require careful financial planning and sometimes even coordination within the family, but they offer excellent opportunities to reduce tax liabilities in legal and strategic ways.