Hello readers welcome back to my blog here I am sharing some tax related tips and investments related to your children. Did you know that expenses and investments made in your child's name can save taxes on your income? If not then you must read this article till the end. The expenses and investments includes a wide variety and most of these investments fall under the Ambit of the section 80c of Income Tax Act within the rupees 1.5 Lakh limit.
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Interest on education loan
You can save your taxes by paying interest on education loan taken for better education of your child. Many of us opt to take a loan to fund our child's higher studies. While this result in a repayment burden, you can gain partially as the interest portion on an education loan is fully Tax deductible under section 80E of the Income Tax Act. The loan can be taken by the borrower, parent or spouse of the student from a recognised financial institution. The loan must be taken for a full time course as approved by the financial institution.
Payment of tuition fees
Tuition fees paid by the parent to fund his or her child's education in any school, University, college or any other education institute with in India can be claimed as deduction under section 80c up to Rupees 1.5 Lakh in a year. The amount of the deduction is restricted to two dependent children and should pertain only to the actual tuition fees paid. However both husband and wife have a separate limit of two children, so each parent can claim for two children. But note that part time courses and coaching classes are not covered under this tax savings.
Expenses on treatment of disabilities and certain ailments
The Income Tax Act allows the parent to claim a deduction from his income for an expense incurred towards the treatment of specific disabilities and illness of a dependent relative under 2 sections. Section 80dd of the act states that expenses incurred towards the medical treatment of dependent relatives suffering from a disability are eligible for a deduction the limit of deduction under the section is rupees 75,000 for a normal disability impairment of at least 40% and rupees 1.25 lakh for severe disability impaired of 80% or above. Section 80 DDB of the act allows expenses incurred towards treatment of specific illnesses for self or dependent relatives including children to be deducted from income tax up to Rupees 40,000.
Minor child's income
When you make investment in your child's name the income earned from this investments will be clubbed with your income however if you have invested anywhere in your minor child's name and this investment generates income you can claim up to Rupees 1500 as a deduction on this income. This is available for up to 2 children for example you can invest up to rupees 15,000 in a long term FD which gives an annual return of 10% and be exempt from tax. Remember that if the interest is on the compounding basis the interest amount will grow over the years resulting in an increase in tax liability.
When you have children you will be forced to incurred various kinds of expenses. A smart individual is one who knows how to get the maximum benefit from these expenses as well as from the investments made in their children's name.
Thanks for reading till the end you can follow this blog for knowing such money related tips for your savings. If you have got benefits from expenses and investments made on your child's name then please share your opinion about that in comment section. Your comments are welcome.
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