Can being married get you a higher tax refund?

Last Updated at: March 20, 2020
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loan Can being married get you a higher tax refund_

One of the many good things about getting married – are higher tax refunds. If you’re married or planning a nuptial soon, here’s how you can plan ahead and save money on taxes. Let’s start with the housing loan deductions.

Housing loan deductions – Can each spouse claim deduction for the same loan?

Yes, buying a house can be a daunting task, especially in today’s age of skyrocketing prices. However, to make housing affordability easier, the government allows husband and wife to claim separate deductions for the same housing loan. This deduction under Section 24B is available to a maximum of Rs.2 lacs. However, if the loan is taken jointly, this deduction of Rs.2 lacs can be availed by both husband and wife. Thus, assuming a housing loan was taken for Rs.40 lacs, on which Rs.4 lacs interest is payable, then an individual can singly claim only Rs.2 lacs. But, if the loan is shared by both spouses, then each person gets a deduction of Rs.2 lacs, and effectively the entire interest component can be rationalised by tax saving.

Section 80 deductions for housing loan

Moreover, the additional deduction for housing loan availed for affordable housing, under Section 80C of deductions is also available to both the husband and wife, therefore the couple can claim Rs.1.5 lacs each. Further, under Section 80EE, if a person jointly owns the house with their spouse and they both co-pay the instalments of the loan taken to finance the house, then both of them can claim a deduction of Rs.50,000 each while filing their tax returns.

File your income tax now

Planning investments to maximise returns – Should you offload investments in your spouse’s name?

If the husband and wife, both are earning but pay taxes according to different tax slabs, it makes sense to manage assets and investments based on one’s tax slab. This assumes even more importance now that there exist multiple slabs in the range of – 10%, 15%, 25% and 30%, as opposed to the erstwhile regime that had lesser slabs. Thus, tax planning can make a huge difference in the couple’s returns. For example, since short term mutual fixed attracts a higher tax, the individual under a lesser tax slab can undertake the transaction in their name.

Similarly, for fixed deposits, since the interest earnings will be clubbed to the income, the spouse with less income can open the deposit in their name and as a result, pay less tax on the same interest earning. As an example, if the wife is within the 10% slab and the husband is paying tax in the 30% slab, an interest-earning of Rs.1 lac will be taxed at Rs.10,000 in the hands of the wife, and Rs.30,000 in the hands of the husband, making a huge difference to the overall tax burden shared by the couple.

Other tax planning avenues for married couples

  • For Joint life policies, on which premium is paid by the couple, a deduction can be claimed by both individuals. This is however subject to the overall taxation limit of Section 80C.
  • While registering property, women are subject to lesser stamp duty and property registration charges in most states. For example, in Delhi, the stamp duty rate is 4% for women, while it is 6% for men. Thus, the couple can consider registering the property in the wife’s name to save additional charges.
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Can being married get you a higher tax refund?

361

One of the many good things about getting married – are higher tax refunds. If you’re married or planning a nuptial soon, here’s how you can plan ahead and save money on taxes. Let’s start with the housing loan deductions.

Housing loan deductions – Can each spouse claim deduction for the same loan?

Yes, buying a house can be a daunting task, especially in today’s age of skyrocketing prices. However, to make housing affordability easier, the government allows husband and wife to claim separate deductions for the same housing loan. This deduction under Section 24B is available to a maximum of Rs.2 lacs. However, if the loan is taken jointly, this deduction of Rs.2 lacs can be availed by both husband and wife. Thus, assuming a housing loan was taken for Rs.40 lacs, on which Rs.4 lacs interest is payable, then an individual can singly claim only Rs.2 lacs. But, if the loan is shared by both spouses, then each person gets a deduction of Rs.2 lacs, and effectively the entire interest component can be rationalised by tax saving.

Section 80 deductions for housing loan

Moreover, the additional deduction for housing loan availed for affordable housing, under Section 80C of deductions is also available to both the husband and wife, therefore the couple can claim Rs.1.5 lacs each. Further, under Section 80EE, if a person jointly owns the house with their spouse and they both co-pay the instalments of the loan taken to finance the house, then both of them can claim a deduction of Rs.50,000 each while filing their tax returns.

File your income tax now

Planning investments to maximise returns – Should you offload investments in your spouse’s name?

If the husband and wife, both are earning but pay taxes according to different tax slabs, it makes sense to manage assets and investments based on one’s tax slab. This assumes even more importance now that there exist multiple slabs in the range of – 10%, 15%, 25% and 30%, as opposed to the erstwhile regime that had lesser slabs. Thus, tax planning can make a huge difference in the couple’s returns. For example, since short term mutual fixed attracts a higher tax, the individual under a lesser tax slab can undertake the transaction in their name.

Similarly, for fixed deposits, since the interest earnings will be clubbed to the income, the spouse with less income can open the deposit in their name and as a result, pay less tax on the same interest earning. As an example, if the wife is within the 10% slab and the husband is paying tax in the 30% slab, an interest-earning of Rs.1 lac will be taxed at Rs.10,000 in the hands of the wife, and Rs.30,000 in the hands of the husband, making a huge difference to the overall tax burden shared by the couple.

Other tax planning avenues for married couples

  • For Joint life policies, on which premium is paid by the couple, a deduction can be claimed by both individuals. This is however subject to the overall taxation limit of Section 80C.
  • While registering property, women are subject to lesser stamp duty and property registration charges in most states. For example, in Delhi, the stamp duty rate is 4% for women, while it is 6% for men. Thus, the couple can consider registering the property in the wife’s name to save additional charges.
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Avani Mishra is a graduate in law from the National Law Institute University, Bhopal. She qualified the Company Secretary course with an All India Rank 1 and is a recipient of the President’s Gold Medal for her academic distinctions. She also holds a B.Com degree with a specialization in Corporate Affairs and Administration.