Investment in Family Members’ Name Can Help in Tax Planning
An individual assessee gets many exemptions u/s VI. There are various investment opportunities that can fetch tax savings for us. But there is a question, on which name the investment should be made? Not all instruments allow tax saving when investment is done on name of spouse or children. Hence, it’s necessary to know whose name will give tax benefit from investments.
There are some investments that can be made in the name of tax assessee or the family members. Investment where family members can include only spouse and child are Life insurance, Public Provident Fund and education loan. However, tuition fees will be available for children only and that too limited up to 2 children’s tuition fees.
Medical insurance is exempt for all family members including spouse, child and parents. However, these all investments are available for family members irrespective of their age and earning. It means all major, minor, dependent or independent members stated above are allowed for investment.
Few investments are only eligible for tax exemption when it’s in the name of assessee. EPF, VPF and National Saving Schemes are those instruments where only name of assessee is eligible for exemption benefit. PPF can be done for members but investment in a statutory provident fund is available on if done in name of assessee. Other than that, investment in Tax saving fixed deposit Schemes, Equity linked saving schemes and Tax saving mutual funds are also eligible for investment when bought under name of assessee only. These schemes can also be bought under a joint name but the first name should be of assessee. However, investment in mutual funds of LIC and UTI can be done in name of spouse or child also.
Except these, investment done in other’s name can’t be eligible for exemption. While looking at the taxation point, laws have provided relief from tax if anything is gifted by a relative including siblings. The gifts will not be taxed under name of receiver while the income made thereafter by this gift will be taxable. Income of spouse will be taxed under name of husband after clubbing it. Income of children or parents of the assessee will not be clubbed in income. Income Tax Act also provides a tax relief on gifts received from relatives up to Rs. 50,000. Above that, gifts from relatives are considered tax free only when transferred on certain specific occasions.