1) Re-invest old tax-saving investments
Once your old tax saving investments have crossed the lock-in period, withdraw the money and reinvest in tax-effective investment instruments to earn tax benefits without having to shell out more money. While schemes such as PPF allow partial withdrawals upon finishing seven years from the time of investment, tax-saving ELSS come with a three-year lock-in period which can be withdrawn entirely or partially.
2) Save tax with the help of parents
You can transfer your savings to the fixed deposit (FD) accounts of your senior citizen parents and earn tax-free interest up to Rs 50,000 in a financial year from each of their accounts. Your parents can then invest the fund in other tax-saving schemes eligible for deduction under Section 80C such as SCSS to fetch more return.
Home loans, not just when they are sourced from banks, but also from parents are eligible for tax deduction benefits under Section 24B for the interest payment you make. However, don’t forget to take a proper interest certificate from your parents as proof of interest payment.
You can also claim HRA and lower your tax liability by paying rent to your parents. However, you do need to have a proper rent agreement and rent slips from your parents to avoid trouble in the event of any scrutiny from the IT department.
3) Pre-school fee deduction under Section 80C
Tuition fees for pre-school, i.e. pre-nursery and nursery, are eligible for deduction under Section 80C for up to two children. So each parent can claim for deduction on fees paid for two children. However, you will need to submit receipt for the payment made to your employer for the financial year.
4) Premium payment for senior citizen parents
Medical expenses have only been going up with time and a health insurance is a must-have to keep these expenses at bay. On top of it, investing in a health insurance can also help you reduce your tax outgo. You can avail deduction of up to Rs 25,000 for premium payment for yourself in a financial year. And you can avail an additional deduction of Rs. 50,000 under Section 80 (D) on premium payment for your senior citizen parents. If a senior citizen pays for the premium of his very senior parents, he/she can claim for an additional deduction of Rs 50,000.
Also, if you are paying for the expenses on medicines for your senior citizen parents, you can avail deduction up to Rs 50,000 under Section 80 (D). However, do keep a record of all the bills and prescriptions safely for submitting proof.