Saving taxes can be difficult if you aren’t following strategic and long-lasting avenues. While having a family can help, as the concerned individual can lower down the tax slabs by showcasing insurance policies and other particulars, children are probably the most rewarding tax saving options for parents, provided proper research work is done before putting the techniques to use. Here’s How Your Child Can Help You in Tax Saving.
How Your Child Can Help You in Tax Saving?
In the subsequent sections, we shall look at some of the best strategies which can be used by an individual for saving taxes, courtesy the involvement of a child:
The Concept of Education Loan
As the name suggests, education loan is a great way to fund the future of a child beside even helping the parents save a substantial amount on taxes. If you, as a parent, are paying the education loan interest, the same amount can be claimed back while calculating the taxable income. Therefore, it becomes easier to nullify the taxable amount by getting back the education loan interest, upon filing returns.
Life Insurance Policies
Provided you buy life insurance online for safeguarding the future of the child, the premiums paid can be used to save taxes on income. Based on the guidelines, tax deduction percentage for the premiums is at least 10 percent of the total policy sum assured. According to Section 80C, the maximum amount is in the ballpark of Rs. 1.5 lakhs. That said, before zeroing in on a purchase, it is important to take note of the inflation rate, premium slabs, and even underlining medical and educational costs.
One of the best insurance schemes, in regard to a child, is the non-participating ULIP or rather Unit Linked Insurance Plan offered by some of the well-known insurers. Like most ULIPs, even a non-participating one relies on insurance benefits and market-linked perks— mostly applicable for someone within an age range of 0-17 years. One such plan is the Smart Scholar ULIP from SBI that also offers tax benefits under Section 80C and guarantees 105 percent of the paid premium as the sum assured in case of death. Another plan is Max Life Insurance’s Future Genius Education Plan that provides flexibility to parents to choose policy term, riders and the timing of money backs depending on the education needs of their child. Apart from these, there are typical child education plans with diverse possibilities when it comes to investment and even guaranteed returns.
3. Health Insurance and the Associated Premiums
According to Section 80D, health insurance plans purchased for the child is subject to tax exemption. Many comprehensive health policies available today are best when it comes to ascertaining health insurance plans for a child. Although the premium paying flexibility varies depending on the preferences of the insured, policies like these offer critical illness riders, accidental benefits, and even tax saving options to the concerned parents. However, a typical health insurance plan comes forth with an extended set of perks, including cashless Mediclaim for the child, seamless policy explanation, and cohesive tax benefits. You can claim a deduction up to Rs. 25,000 per year for the medical insurance premium paid for your child.
4. Tuition Fee Exemptions
Having a child or even two can help you with decent tax exemptions, especially when it comes to the tuition fees. Based on the Section 80C, almost 1.5 lakh of tuition fee amount can be reclaimed under the IT act. However, the entire tax saving plan works the best when encompasses two children. That said, you must understand that the tax exemption slab is only valid if the child is pursuing full-time courses. Moreover, there is also a Section 10 which offers a tax exemption of 100 rupees per month for one child while even offering benefits pertaining to hostel allowance exemption (for a maximum of two children).
Having a child is a matter of fulfillment, but things get even better when you, as a parent, can use these child-specific plans for getting hold of decent and substantial tax exemptions.
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