The income tax law has avenues which can help you achieve the maximum tax advantages. Owing to the progressive nature of the taxation law, the income tax extends special tax benefits to a senior and super senior citizens. This is how you can avail of these benefits.
Life Insurance Premium
The Income Tax Act allows you deduction under Section 80C up to Rs 1.5 lakh in respect of life insurance along with various other things. However, if you are a salaried person, this limit might just get exhausted by the offset of the Employee Provident Fund. Moreover, utilisation of home loan principal can get exhausted with the principal repayment and other items.
But, there is a good news for you. The deduction can be claimed for life insurance if it has been made for one’s children. So, get your parents to pay your life insurance premium even if they are not senior citizens. It can be used to take deductions from your parent’s income.
The law does not deny payment of premiums by parents for their children, irrespective of the fact whether the children are married or unmarried, major or minor, financially dependent on parents or not.
Since it is remotely likely that your parents be tied with EPF contribution or home loan payment, they can help you in claiming tax benefits within the protective boundaries of the law.
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Health Insurance Premium
The Chapter VI deduction of the Income Tax Act allows you to claim the deduction for health insurance up to Rs 25,000 for your family and up to Rs 30,000 for your parents. This claim amount goes to Rs 50,000 if your parents are senior citizens (above 60 years of age). Within this limit, you can claim up to Rs. 5,000 for regular health check-ups of your family and parents.
If the income of your parents is not sufficient to absorb a deduction of Rs 50,000, you can claim this to reduce the tax liability. The Income-Tax Act does not mandate that your parents should be financially dependent on you.
But, both of you need to claim the insurance premium amount separately.
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Bank Deposit Interest amount
The interest from bank deposits qualifies for tax-deduction up to Rs 50,000. If you receive bank interest more than Rs 50,000, then it is advisable that you gift some parts of bank deposits to your parents. Gifts received from children is fully exempt under Section 56(2). Hence, there will be no tax implication for this transfer for you and your parent. Moreover, the interest paid on the fixed deposit will qualify for tax deduction up to Rs. 50,000 adjustable with your parent’s income.