Income tax planning in India is not limited to your own income and investments. The Income Tax Act also allows taxpayers to reduce their tax burden by claiming deductions on expenses and investments made for family members. If you opt for the Old Tax Regime, you can legally save a significant amount of tax by understanding how various sections apply to parents, spouse, children, and in limited cases, even siblings.
Here’s a detailed look at how family-based tax planning works and which sections can help you maximize deductions.
One of the most powerful tax-saving provisions related to parents is Section 80D, which covers health insurance and medical expenses. If you pay health insurance premiums for your parents, you can claim deductions even if they are not financially dependent on you.
For parents below 60 years, the maximum deduction allowed is ₹25,000
For senior citizen parents (60 years or above), the limit increases to ₹50,000
Within this overall limit, expenses of up to ₹5,000 for preventive health check-ups can also be claimed.
If your senior citizen parents do not have health insurance and face difficulty in getting coverage, the law allows you to claim medical expenses up to ₹50,000 under Section 80D, provided no insurance policy exists for them.
While medical-related benefits are generous, certain deductions are not permitted. For instance, life insurance premiums paid for parents do not qualify for deduction under Section 80C, even if they are financially dependent on you.
However, if a dependent parent suffers from a specified disability, Section 80DD allows a deduction of ₹75,000, which rises to ₹1,25,000 in cases of severe disability.
Additionally, Section 80DDB provides tax relief on expenses incurred for treatment of specified critical illnesses. The deduction limit is ₹40,000 for non-senior citizens and ₹1,00,000 for senior citizens, subject to medical certification.
Tax benefits for brothers and sisters are relatively limited and usually depend on financial dependency. For example, Leave Travel Allowance (LTA) can be claimed if dependent siblings travel with you within India, subject to employer rules.
Sections like 80DD and 80DDB may also apply to siblings if they are dependent and meet the medical conditions prescribed under the law.
However, deductions such as Section 80C for school fees or insurance and Section 80E for education loan interest are generally not available for siblings, making tax planning in their name more restricted.
Tax planning becomes easier and more flexible when it involves a spouse. You can claim LTA benefits for travel undertaken with your spouse within India, regardless of whether your spouse is financially dependent.
Under Section 80D, health insurance premiums paid for self, spouse, and dependent children qualify for deductions up to ₹25,000 (higher limits apply if any insured member is a senior citizen).
Section 80C allows deductions for:
Life insurance premium paid for your spouse
Contributions made to your spouse’s PPF account
Additionally, interest paid on education loans taken for your spouse’s higher education qualifies for deduction under Section 80E, offering substantial tax relief over several years.
The Income Tax Act provides multiple tax-saving opportunities for children-related expenses:
Section 80C allows deduction for life insurance premiums paid for children
Tuition fees paid to schools (as per prescribed limits) also qualify under 80C
Contributions to PPF accounts in a child’s name can be included for tax planning
Section 80E allows deduction on interest paid on education loans taken for children’s higher education
Health insurance premiums for children can be claimed under Section 80D, usually when children are financially dependent.
Not all tax-saving investments offer transferable benefits. Products like ELSS mutual funds or National Savings Certificates (NSC) generally provide deductions only to the person in whose name the investment is made.
Therefore, while planning taxes using family members, it is essential to verify:
Who is eligible for the deduction
Which section applies
Whether dependency conditions are met
A well-informed approach can help you reduce your tax liability legally while meeting your family’s financial needs effectively.
