Introduction
Congratulations on tying the knot! As you embark on this beautiful journey together, there are practical matters, like taxes, that you’ll need to address. Marriage brings about significant changes, including financial ones, and understanding how it impacts your taxes is crucial. Here are some tax tips tailored for newlyweds in India:
Tax rules for wedding gifts
If the cost of gifts received by a newly-wed couple exceeds Rs.50,000 and it has not been presented by the individual listed as an immediate family member under Section 56 of the Income Tax Act then it would be taxable. In such cases, the tax will be charged to the recipient. For example, your gifts from your friends worth Rs.45,000, you will not be charged any tax but if you get another gift whose monetary value is Rs.10,000, then the total monetary value of the gifts you have received would be Rs.55,000, and this whole amount would be subject to tax based on the slab rate associated with ‘income from other sources’.
In India, Income tax is not levied on gifts received on the occasion of marriage regardless of their value or form. This includes cash, stocks, jewellery, automobiles, electronics, artefacts, and immovable property such as houses or land. However, a newly married couple will have to pay stamp duty up to Rs.50,000 if they receive immovable property as a gift from unrelated individuals.
Cash received as gifts should be preferably deposited in the bank accounts around marriage dates to avoid any tax implications. If you are getting high-value gifts like houses or cars, get a gift deed made near the wedding date. It is recommended that you maintain a record of all wedding gifts, including cash, precious jewelry or gold, etc., for proper asset documentation
Medical Insurance
The first and foremost task a couple plans for after getting married is the family’s health and safety. As per Section 80D, a person and HUF can claim a deduction of Rs 25,000 for health insurance premiums for themselves and their family.
25,000 tax deduction is a deduction of 20,000 for insurance premiums and a sub-limit of 5,000 for going through precautionary medical checkups. So if you miss out on availing of the health checkups per year, you will miss out on the sub-limit. This is the maximum limit to claim the deductions as per Indian Income Tax Law.
A higher deduction can be claimed by paying the premium of your spouse’s health insurance policy and clubbing it into your expenses. A deduction that can be claimed on the premium you pay for yourself and your spouse is up to a limit of Rs 25,000. If the spouses are tax-paying individuals, they can both avail of maximum benefits individually under section 80(D), which totals tax deductions of Rs.50, 000 per year for paying the family’s health insurance premiums.
For instance,
Premium on your Health Insurance – Rs 13,000
Premium on your spouse’s Health Insurance – Rs 11,000
The total deduction you can avail of – Rs 25,000
Taxable income – Rs 4,00,000
Deduction under Section 80D – Rs 24,000
Taxable income – Rs 3,76,000
By paying for your spouse’s Health Insurance, you can reduce your taxable income by Rs 10,000
Home Loans
After marriage, the next thing young couples plan is to build a new home. Home loan has many tax benefits under Section 80C of the Income Tax Act. If you and your partner are both tax-paying individuals, you can attain double the tax benefits if you co-borrow your home loan on a 50:50 basis. As per Section 80C, the individuals are allowed a deduction of Rs. 1,50,000 for the home loan repayment per year. In the case of a married couple where both are taxable individuals and co-borrowers of the loan, this benefit can be doubled to Rs. 3,00,000 per year.
Additionally, as per Section 24(B), you can get Rs. 2,00,000 per year on the interest you pay on your home loan. Simultaneously this benefit can be doubled when both partners are taxpayers and co-borrowers of the loan on a 50-50 sharing.
Life Insurance Policy
Under a life insurance policy, both husband and wife can individually claim deductions under Section 80C. However, in such policies, the premium depends on the ages of the husband and wife. Thus the exemption claim also depends on the same.
Benefits from salary structure
If you both are earning well, you can use the different components of the salary to avail yourself of additional tax benefits. House Rent Allowance (HRA), Leave Travel Allowance (LTA), and Medical reimbursement are some of these components.
For instance, if the husband and wife are staying in rented accommodation, then the minimum of the following will be tax-exempt on HRA:
- Actual HRAamount received
- 50% (metro city) or 40% (non-metro city) of the basic salary
- Total annual rent paid – 10% of salary.
Leave Travel Allowance
If you and your partner are both taxpayers, then you can enjoy four travels each in a block period of four years, totaling eight travels in four years combined for the two partners. On this vacation, the expenditure done is tax-exempt. Though it all depends on the employer, as LTA is part of your CTC, the amount of LTA you have in your package defines the amount of money you can spend on your travels.
Within this amount, whatever you spend is tax-exempt, while whatever you haven’t spent gets added to your taxable salary, which is then taxed as per your income tax slab. Hence it is advisable to take holidays and go on vacations to keep your income tax low for both tax-paying partners in a marriage.