Tax saving for Rs. 1 lakh salary


I earn more than Rs. 1 lakh per month. I have tried all investment options to save taxes like Sec. 80C, NPS etc. Is there any other way to save tax?



Here are some ways you can save taxes if you are in the high income tax bracket.

Be part of HUF

You are a resident individual, you have the option of being part of a HUF – Hindu Undivided Family. It is an option for people with high income or multiple sources of income who are seeking to save taxes. A HUF is an independent financial entity that can be formed between lineal ascendants and descendants of Hindu, Jain, Sikh, or Buddhist family members.

A HUF has its own PAN and bank account and is typically headed by the senior-most member of the family. He is the ‘Karta’ – the person overseeing the family’s matters. An HUF’s collective income is taxed separately and not clubbed with the individual incomes of its members. For example, you and your wife each earn a salary of Rs. 15 lakhs from your respective jobs, and you also earn Rs. 5 lakhs as rent from your ancestral property. This rental income in the hands of you or your wife would be taxed as per the prevailing tax slab of 30%.

But if you have formed a HUF and allowed it to claim rent on your family’s behalf, the rental income would be taxed at only 10%. Also, any gift received by the HUF from its members will not be subject to taxes.

Transferring Money To Spouse

Money received from one’s spouse is tax-free. Though the income generated by this gift can be taxed, this method can be used to decrease long-term tax incidence. Let’s assume you transfer Rs. 1,00,000 to your wife, who makes a Fixed Deposit and earns Rs. 8,000 in a year. The transfer is tax-free; the interest earned isn’t. Assuming that your wife has not generated any other income for the year, this income of Rs. 8,000 is taxable not in her hands but in yours. This interest income will be clubbed with your income for the year and taxed as per your slab.

However, in the following year, any income generated from this Rs. 8,000 is taxable in your wife’s hands. This reduces your tax incidence in the following years since you have fewer income-generating assets.

Give Money To Your Senior Citizen Parents

The elderly are entitled to special tax and investing benefits. For example, senior citizens (between ages 60 and 80) are entitled to the exempted income of Rs. 3,00,000 as opposed to Rs. 2,50,000 for regular taxpayers. For super senior citizens, the exemption limit is Rs. 5,00,000. Your parents can receive income from you. The transfer of money among lineal ascendants and descendants is tax-free. The money can be invested in special schemes such as the Senior Citizens’ Savings Scheme (currently earning 8.5% PA) that earn higher returns than schemes for the general public (such as the PPF, which earns 8%).

By giving money to your parents who may have lower tax liabilities than you, you can achieve a higher degree of tax efficiency when it comes to saving tax on your collective investments.

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BB Expert