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.