Smart ways working couples can save Income Tax together

ways working couples can save income tax togetherSmart ways working couples can save Income Tax together

Are you earning along with your spouse, but still struggling with high income tax? Income tax would eat away some of your income. If you are working couple, there are several smart ways where you can save income tax in India. In this article, I would detail some of the specific ways on how you can save income tax for the income you are earning along with your spouse.

Smart ways working couples can save Income Tax together

1) Invest in the name of your spouse who is in the lowest tax bracket

One of the biggest mistake one would do is just invest in either husband or wife's name and worry about income tax. If you are investing in fixed income schemes like bank fixed deposits, recurring deposits, non convertible debentures, etc., the best way is to invest such money is invest in the name of your spouse who is in low tax bracket individuals.

Also Read: Ways to reduce income tax on Rental Income and Deemed Rental Income in India

Let me explain with an example:

Rajesh and Sandhya are earning couple. Rajesh is in the 20 % tax bracket and Sandhya is in the 10 % tax bracket. Any money invested by Rajesh in fixed income options would attract a tax of 20%. If Rajesh can plan well, he can spend money for general expenses from his account and balance he can invest. On the other hand, entire income of Sandhya can be invested in such fixed investment options. This way it would attract 10% income tax or maximum it would spill over to 20% tax bracket to some extent.

2) Invest through your spouse in tax free investment option

If you give some amount as a gift to your spouse who is a low tax bracket member, any income generated through that would be clubbed with your income and you need to pay income tax based on your tax bracket. However, if you can invest such gift money in tax free investment options like PPF, Tax free bonds, etc. such income is treated as your spouse's income which is tax free and any further investment of such amount would be treated as spouse income and you might pay less income tax based on the tax bracket of your spouse.

Explaining with an example.

Preetam is in the 20 % tax bracket and his wife is in the 10 % tax bracket. Preetam has gifted Rs 10 Lakh to her wife and invested such money in tax free bonds in her name. Such bonds have generated 8.5% interest, i.e.  Rs 85,000 per annum, which is tax free. He can invest such amount of Rs 85,000 in any fixed income option and pay income tax of 10% on such return as his wife is in the 10 % tax bracket. If he would have adopted this approach, he need to pay 20% tax.

3) Consider taking Joint Home Loan

Another killer way to save huge income tax is to take a joint home loan by the couple. The share can be indicated during registration of the property. One can save tax by way of interest on home loan to the extent of Rs 2 Lakhs per member per annum. One can also get 80C exemption on the principal home loan amount of Rs 1.5 Lakhs per member per annum. This way a working couple can save income tax up to Rs 7 Lakhs of taxable income.

Also Read: Top Tax Free Investment options in India

4) Leave Travel Concession (LTA) exemption

I have observed that some couples would think that LTA can be claimed twice in a span of 4 years and only one among them would opt for it. If you can plan well, you can claim LTA for 4 times in a span of 4 years by both the couple every alternative year (Twice by Husband and Twice by Wife). This way you would be enjoying your vacation every year. However, note that only travel fare / train cost / travel cost is eligible for LTA exemption.

Conclusion: There are several smart ways where a working couple can save income tax. If you can plan well at the beginning of the financial year, you can save maximum income tax during the financial year.

Readers, how you are saving income tax if you are working couple?

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Smart ways working couples can save Income Tax together

The Author

Suresh KP

Suresh KP i.e. me have written 1,800+ articles on this blog. I have done by B.Com from Osmania University and then MBA-Finance from Symbiosis University, Pune. I have over 20 years of experience in analyzing various investment options and money saving ideas. I love doing financial planning, Mutual Fund Analysis, Searching long term Stocks for wealth creation, IPOs, reviewing Insurance Products, analysing Health insurance Plans etc.


Add a Comment
  1. Can I avail tax benefits on home loan for my wife also as she is Co sharer in my house loan

  2. How about saving tax for entrepreneurs couple with small buissiness

  3. It very informative, thanks for this Suresh. How to gift my income to my wife? Can I transfer funds from my account directly to her account? Thanks again.

    1. Yes, you can transfer through your account

  4. Dear suresh,
    Thanks for thr article but I think u should clarify the first point as am of veiw that clubbing provisions make any thing like u told null and void . and also refer and . Please reconcile.

    1. Point no.1, both are working couple and have their own PAN card would invest their money. Hence clubbing provisions does not apply.

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