17.   Working Couples Can Save Income Tax – How ?

Nowadays there are many are working couples and both spouses are income tax payers. The provisions of deduction of tax at source apply to both of them but in some cases it is possible to save through proper tax planning. In this tip we have described certain situations where through proper tax planning money can be saved by planning by the couples on income tax.

Take Advantage of Different Tax Slabs

In the case of a working couple the initial personal exemption limit enjoyed by a male is ` 2,00,000; similarly the female taxpayer false enjoys the basic income-tax exemption of ` 2,00,000. Thereafter, the personal income tax rates iire the same for both. For example, it is 10% on total income in excess of the exemption limit up to ` 5,00,000 and at 20% on the total income between ` 5,00,001 and ` 10,00,000. Thereafter, the income tax rate is 30% to be increased by a further 2% + 1% education cesses. These rates applicable for different income tax slabs can afford a good deal of opportunity for tax saving for a working couple. If, the full deduction of ` 1 lakh cannot be obtained in respect of life insurance premium contribution to public provident fund, etc. by way of deduction under Section 80C, it would be better to claim the said deduction in some cases in the hands of that spouse whose income falls in the highest slab of 30%, rather than in the case of the spouse whose income falls in the slab attracting the rate of 10% or 20%. In some cases one spouse, say the wife, may be paying the life insurance premium (LIC), say of ` 25,000, and her total income is say, ` 2,25,000 she may like to pay the life insurance premium herself so as to get deduction of the LIP under Section 80C and bring down the total income to ` 2,00,000. So that she may not be liable to pay any tax for the F.Y. 2012-2013. It may be that in case of her husband full deduction may not be available for ` 1,00,000 under Section 80C and his income may be liable to the maximum rate of tax. Then, it would be better and worthwhile to claim the deduction in her husband’s name rather than that of the wife.

This is because deduction of LIP under the higher income tax slab would lead to a higher overall tax deduction for both.

House Ownership and HRA

Sometimes, the spouses have a possibility of saving income tax on house rent allowance within the family, particularly where one of them owns a house. For example, A is a landlady and is staying in her house with other members of her family. If her husband gets a house rent allowance which can be claimed exempt from income tax, then he may pay house rent to his wife and claim exemption in respect of the house rent so paid by him from house rent allowance to the extent deductible under the provisions of Rule 2A. In the above case, the landlady Mrs. A is also employed and she gets a rent, say of ` 30,000 per month from her husband and the husband is able to take full benefit of the amount by way of exemption of house rent allowance, then this will result into a lower rate of tax because of deductibility of 30% deduction from the rent under Section 24. Thus, even if Mrs. A were to pay tax on ` 3,60,000 rent she would not pay tax on the whole of it but only on ` 3,60,000, less 30% thereof, i.e., ` 3,60,000, minus ` 1,08,000 on ` 2,52,000 only. The effective highest rate would be 21% only. Thus, a saving of 9% of income tax on ` 3,60,000, i.e., ` 32,400 would be possible in the case of this couple. Different income tax saving would be possible in different cases.

Other Tax Aspects

As far as possible, drawings should be made by the spouse having the higher income so that the taxable income from investments made by him attracts less tax than by the person having a lower income.

Both husband and wife should, by having gifts from some elderly persons in the family have a separate Hindu Undivided Family so as to claim a separate exemption of
` 2,00,000 through proper tax planning for the FY 2012-2013 (A.Y2013-14).

If the couple have children say, one son and one daughter, each one can form a trust for the would-be spouse of one child separately in such a manner that the initial exemption of
` 2,00,000 under the provisions of the Income Tax Act is available. If the couple does not have a child, then the husband can have a trust for the unborn son, and the wife a trust for the unborn child daughter to get a separate exemption of ` 2,00,000 each.

Besides, either in worships some deity, then he or she can have a private religious trust of one’s own chosen deity. Such a trust would be liable to assessment as a separate taxpayer under the category of artificial juridical person and would enjoy a separate exemption of
` 2,00,000. Thus, working couples can save a fair amount of income tax through proper planning.
Sec. 143(3) : Scrutiny Assessments by Income Tax Department
“Penalties” Under Income Tax Act. 1956
How is a Search Operation Conducted by Income Tax Department ?
Surveys for Checking Ostentatious Expenditure
Surveys for Enforcing Compliance with Provisions of TDS
“Summon” U/s 131 of Income Tax Act.
Investigation by Income Tax Department:
Appellate Authorities of Income Tax Department
Power to Call for Information U/s Sec. 133(6) of Income Tax Act.
Specific Surveys U/s 133A(1) of Income Tax Act.
Types Of Income Subject To TDS [Deduction Of Tax At Source]
Pre-Requisite For Claiming Income Tax Refund
Benefits of Filing Income Tax Returnsn
Section-139(9): Defective Tax Return
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How is a Search Operation Conducted by Income Tax Department ?
The provisions relating to search and seizure are contained in section 132 of the Income Tax Act, 1961.
Sec. 143(3) : Scrutiny Assessments by Income Tax Department
Scrutiny assessment refers to the examination of a return of income by giving an opportunity to the assessee to substantiate the income declared and the expenses, deductions, losses, exemptions, etc. claimed in the return with the help of evidence..
“Penalties” Under Income Tax Act. 1956
Penalties by way of monetary payments are charged under the Income Tax Act for various defaults relating to payment of taxes, maintenance of accounts, for noncompliance and non co-operation during proceedings, for evasion of tax, etc..
Income of Individuals And HUFs – As a Tax Payers Under Income Tax Act, 1961.
The individual tax payers and also the HUFs while proceeding to calculate the net taxable income in the first phase are required to arrive at the gross total income under different heads of income...
Types Of Income Subject To TDS [Deduction Of Tax At Source]
The following types of incomes are mainly subject to deduction of tax at source: (a) Salaries Section 192. (b) Interest on securities Section 193..
Pre-Requisite For Claiming Income Tax Refund
For claiming income tax refund the first prerequisite is that there should have been excess tax paid or deducted at source on the basis of return of income.
Section-139(1) : Provision for Voluntary Income Tax Return
Every person,— (a) being a company or a firm; (whether having income or loss) or (b) being a person other than a company or a firm if his total income or the total ncome of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall file a return of his income in the prescribed form.
Benefits of Filing Income Tax Returnsn
We have heard many a times that every individual whose total income exceeds the maximum exemption limit is obligated to furnish his/her Income Tax Return or ITR.
Section-139(9): Defective Tax Return
Where the Assessing Officer considers that the return of income furnished by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within a period of 15 days from the date of intimation.
Section 139(5) : Revised Income Tax Return
If any person, having furnished a return u/s 139(1), or in pursuance of a notice issued under section 142(1), discovers any omission or any wrong statement therein, he may furnish a revised return at any time.
Section-139(4A) : Income Tax Return of Charitable and Religious Trusts
Every person in receipt of income derived from property held under trust or other legal obligation wholly or partly for charitable or religious purposes or of income being voluntary contributions referred to in section 2(24)(iia) shall.
Section-139(4) : Belated Income Tax Return
If an assessee has not furnished a return of his income within the time allowed to him under section 139(1) or within the time allowed under a notice issued under section 142(1).
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