Income tax tips for Rs. 200,001 to 1,000,000 slab

Individuals falling in the high income group often miss out on some of the lesser known tax planning strategies which could substantially reduce their tax liability.

(1) Gift or Loan to Major Children – Avoid investing the amount in your own name as it will attract tax, rather gift the surplus to your major children. The interest earned on this investment shall be exempted up to the basic exemption limit in the hands of your major children. Also, do not forget to file income tax in their name for better tax-planning.

(2) Create ‘Trust’ for your Minor Child – Clubbing provisions will apply in the case of gift to minor child. Therefore, create a “Specific beneficiary trust” , where no part of income should be spent on the minor child during the period of minority. This technique will not attract clubbing of income of a minor child with that of the parents.

(3) Stamp duty and Registration fee deduction – You can claim deduction in respect of stamp duty and registration charges paid for acquiring the house. The deduction is allowable in the year of house purchase provided the house is in your possession.

(4) Set off Capital losses against gains – Most of the times, people do not show their losses in tax returns and miss out on opportunities of setting them against capital gains. So, if you have made a profit of Rs. 5 lakhs on real estate property and Rs. 1 lakh loss on stock holdings than the long term capital gains tax after indexation will be Rs. 80,000 (20% tax) instead of Rs. 1 Lakh.

(5) Joint-ownership of property – Always buy a home in joint-ownership with your spouse or parents as this will ensure that maximum tax advantage is reaped out by all the co-borrowers.

(6) Buy Health insurance for your child – When you take health insurance for your child, you can claim the premium paid as a deduction from your income, up to Rs. 15,000 in a year.

(7) Home Loan and HRA – If you are not residing in a rental accommodation due to valid reasons and own a home in your name, then you can claim both HRA and home loan exemption to the full.

(8) Second-home owners – The interest paid for the loan borrowed for buying a second home can be claimed in full as a deduction. Also, you can decide on which house needs to be choosen as self-occupied, so that you can take an advantage of lowering the tax.