Couples can claim tax benefits separately

Success and a comfortable professional life is what most of us look for in our career cycle. While rising double incomes lead to both spouses paying their taxes individually,it also enables claiming of exemption/deductions separately by the couple.

Success and a comfortable professional life is what most of us look for in our career cycle. While rising double incomes lead to both spouses paying their taxes individually,it also enables claiming of exemption/deductions separately by the couple.

Slabs and deductions: The basic exemption limit in FY11 is Rs 1,60,000 for men while for resident women it is Rs 1,90,000. This can offer tax saving opportunities for working couples. For long-term savings such as insurance premium,contribution to public provident fund,etc. where deduction under Section 80C of the I-T Act,1961 (the Act) of Rs 1,00,000 is not sufficient to be availed by each of the spouses,it may be better to claim the deduction in the hands of the spouse whose income falls in the higher tax slab.

Co-occupancy of a rented flat: If the couple resides in a rented house under a joint occupancy rent agreement and both are contributing towards the rent,the house rent allowance exemption can be claimed by both spouses in proportion to the portion of rent paid by each of them.

Co-ownership of house: For working couples,purchasing a house property in joint name as co-owners may be advantageous. While a joint application could make a couple eligible for a bigger home loan,it could also have tax advantages. Both can avail the deduction for repayment of interest on housing loan of Rs 1,50,000 per annum and Rs 1,00,000 per annum towards repayment of principal (subject to overall limit under section 80C of the I-T Act) each on self-occupied property. However,the deductions should be claimed in proportion of the share in the property held by each of the partner.

In case one of the spouses owns two houses,out of which one is self occupied and other is vacant,one of the property would be subject to tax as deemed to be let out property and this could have possible wealth tax implications as well. However,if a couple plans to purchase two separate houses,it is better that each spouse owns one house each as one house for each individual would be considered as self-occupied property and valued as nil.

Benefit of LTA exemption: If both spouses are getting the LTA benefit in their respective places of work,they can both claim separate exemptions for separate journeys for travel within India. This could take care of at least four journeys performed by the family in a block of four years vis-à-vis the limit of two journeys for one individual.

* The writer is executive director (Tax),KPMG