Marriage is a significant life event that is full of joy, celebration, and fresh starts. However, marriage also entails several financial issues, particularly with regard to taxes, in addition to the planning of the wedding and honeymoon. From filing status to deductions, credits, and potential traps, understanding how marriage affects your tax situation is critical for creating a solid financial future together. In this blog, we’ll go over the essentials to assist couples in confidently navigating the often-confusing intersection of love and taxes.
Marriage and Tax Benefits
Beyond the emotional benefits, marriage can offer substantial financial benefits. Couples who file jointly may be eligible for bigger standard deductions, valuable tax credits, and more favorable tax brackets, thereby lowering their total tax burden. Marriage can affect retirement contributions, inheritance planning, and health-related tax benefits in addition to immediate savings. Knowing these benefits enables couples to maximize the benefits of being legally joined in marriage by making well-informed financial decisions.
Tax Benefits During Marriage
- Wedding Gifts Are Tax-Exempt: Gifts received from immediate family members during your wedding are exempt from income tax under Section 56 of the Income Tax Act. You can cherish these thoughtful gifts without worrying about tax implications.
- Wedding Expenses Aren’t Taxable: Expenses incurred for your wedding are considered personal expenditures and are not taxable, allowing you to plan your celebration freely.
- Joint Filing Benefits: Married couples can file taxes jointly, often resulting in lower tax rates and access to higher deductions.
- Higher Standard Deduction: Couples filing jointly can claim a larger standard deduction, reducing taxable income and increasing potential savings.
- Access to Tax Credits: Marriage can make you eligible for credits like the Child Tax Credit, Earned Income Tax Credit (EITC), and education-related credits.
- Spousal IRA Contributions: Even if one spouse has no income, the other can contribute to a Spousal IRA, gaining additional tax-deferred retirement benefits.
- Estate and Gift Tax Benefits: Spouses can transfer assets to each other without triggering gift taxes, simplifying estate planning.
Tax Benefits After Marriage
- Double Home Loan Deductions: If both partners are earning and jointly own a house with a joint home loan, each spouse can file for deductions individually. Under Section 80C, both can claim up to ₹1.5 lakh each on principal repayment, and under Section 24(b), up to ₹2 lakh each on interest. All of that could result in a ₹7 lakh deduction, which would drastically lower your taxable income.
- Higher Health Insurance Deduction: Both couples with health insurance coverage can claim tax benefits under Section 80D, up to ₹25,000 each or ₹50,000 combined. This guarantees both financial security and significant tax savings.
- Smarter Income Planning Between Spouses: If one spouse earns less or does not work at all, couples can maximize their investments by transferring funds or placing investments in the name of the lower-income spouse. This can help move some taxable income to a lower bracket, lowering the family’s overall tax burden.
- House Rent Allowance (HRA) Exemption: If both partners receive HRA as part of their pay and live in rented housing, they can claim an HRA exemption based on their individual salaries and rent contributions. As a result, the tax relief provided for housing expenses is essentially doubled.
- Enhanced Financial Planning Opportunities: Marriage enables couples to combine financial goals—such as home ownership, retirement, or insurance—and arrange investments in a way that optimizes deductions while minimizing taxes.
Sources of Income for Unsalaried Housewives
There are still ways to create money while staying at home. In today’s society, women can generate money from a variety of sources, both traditional and modern, while also managing their household obligations. Here are a few common income sources that can be stated when completing income tax returns:
- Rental Income: If a housewife owns rented property, the rent she receives becomes a reliable source of income. This income is taxable under the head ‘Income from House Property’ after permissible deductions.
- Dividend Earnings: Investments in mutual funds or corporate stock can produce dividend income, providing consistent profits without the need for active labor. It is necessary to record these incomes while filing taxes.
- Interest from Savings and Deposits: Interest earned on savings accounts, fixed deposits, recurring deposits, or other savings instruments is classified as ‘Income from Other Sources’ and is taxed over the applicable exemption levels.
- Capital Gains: Selling assets such as property, gold, or shares can result in capital gains, which are taxable depending on whether the asset was held for a short or long period of time.
- Home-Based or Freelance Work: Many homemakers earn money through small enterprises or freelance work, such as tutoring, catering, online craft sales, or digital services. Under “Profits and Gains from Business or Profession,” this income is subject to taxation.
- Gifts and Inheritances: Gifts from non-relatives that total more than ₹50,000 in a fiscal year are taxable, whereas gifts from relatives are tax-free. In a similar vein, inherited property is exempt, but any income derived from it may be subject to taxation.
- Pension or Family Pension: A housewife’s family pension is considered taxable income under ‘Income from Other Sources’, although some reductions are possible.
Income Tax for Housewives in India
Housewives are essential to household management, and many now earn income from investments, home-based jobs, or other sources. Housewives may still need to file an Income Tax Return (ITR) if their income exceeds the basic exemption limit, even if they do not have a permanent wage.
In India, the standard exemption limit under the Income Tax Act for individual taxpayers (below 60 years) is ₹2.5 lakh per financial year. If a housewife’s total annual income, including rent, interest, capital gains, and freelance labor, exceeds this amount, she must submit an ITR.
Tips to Save Income Tax – Married Couples
- Opt for Joint Home Loans: If both partners work, obtaining a joint home loan can increase your tax benefits. Partners can deduct up to ₹1.5 lakh under Section 80C for principle repayment and ₹2 lakh under Section 24(b) for interest payments. That’s a total of ₹7 lakh in potential deductions for the couple!
- Invest in Health Insurance Separately: Both spouses can purchase individual or family health insurance policies and claim deductions under Section 80D (₹25,000 each for self and family, or ₹50,000 combined). This not only reduces taxes but also assures improved health coverage.
- Plan Investments in the Lower-Earning Spouse’s Name: If one spouse has a lesser income, investing under their name can help to decrease overall tax liabilities. Since they are in a lower tax rate, interest or dividend income will be taxed less or may be tax-free.
- Claim House Rent Allowance (HRA) Separately: If both couples receive HRA and pay rent, each can claim an exemption for their portion of the rent. This tactic can optimize the household’s overall HRA benefit.
- Utilize Section 80C Smartly: Plan your joint investments to maximize the ₹1.5 lakh deduction limit under Section 80C per individual. To maximize savings, consider investing in PPF, ELSS mutual funds, life insurance, or house loan principal repayment.
- Transfer Assets Strategically: While direct income transfers may trigger clubbing requirements, spouses can give or transfer funds to each other for tax-saving investments as long as they are done wisely and in accordance with tax legislation.
- Open a Joint Account for Investments: Keeping a joint bank or demat account for shared investments allows you to monitor income, deductions, and capital gains smoothly, guaranteeing you don’t miss out on potential tax advantages.
- Take Advantage of Education or Child-Related Deductions: If you have children, claim deductions for tuition fees under Section 80C and education loan interest under Section 80E. These can help reduce your taxable income substantially.
- Make the Most of Tax-Free Allowances: Aside from HRA, consider other allowances such as Leave Travel Allowance (LTA) or Meal Coupons that can be built into your income to save even more money on taxes.
How to File ITR for Housewives
- Identify Your Income Sources: Begin by identifying all of your sources of income, including rental income, interest from savings or fixed deposits, profits from investments, capital gains, and income from home-based enterprises. You can select the appropriate ITR form later if you are aware of the source of your income.
- Understand Your Tax Slab: Determine which tax bracket applies to you based on your total income and age. Income up to ₹2.5 lakh annually is tax-free for the majority of those under 60. Additionally, you can choose between the old and new tax regimes to see which provides greater advantages.
- Choose the Right ITR Form
Selecting the correct ITR form is crucial.
- Use ITR-1 (Sahaj) if your income comes from salary, one house property, or other simple sources.
- Use ITR-2 or ITR-3 if you have multiple income sources like capital gains or business income.
- File Your Return Online: Go to the official Income Tax e-Filing website. Create an account or log in, enter your information, accurately report your income, and upload any necessary files. For convenience, the portal also permits pre-filled data.
- Verify TDS Details: Before submitting, double-check your Form 26AS or Annual Information Statement (AIS) to ensure that all of your TDS (Tax Deducted at Source) information matches what is on file in your account. By doing this, you can prevent inconsistencies in the future.
- Claim Deductions and Exemptions:
Don’t forget to claim all applicable deductions:
- Section 80C: For investments like PPF, ELSS, or life insurance (up to ₹1.5 lakh)
- Section 80D: For health insurance premiums
- Section 24(b): For home loan interest deductions
These deductions can significantly reduce your taxable income.
- Verify Your Return: Your return needs to be validated after it is submitted. Using Aadhaar OTP, net banking, or other techniques, you can e-verify it right away. Alternatively, you may submit a signed copy of your ITR-V form to the Centralized Processing Centre (CPC) within 30 days.
- Track Refunds and Notices: After verification, your return will be handled by the Income Tax Department. Keep an eye on the portal for refund changes or alerts, and make sure your bank account information is correct for a fast refund credit.
Final Thoughts
Marriage is the start of a joint journey—emotionally, socially, and financially. Understanding how taxes operate after marriage can help couples make better financial decisions and prevent surprises during tax season. Marriage can reduce your tax burden in a variety of ways, including joint filing perks and deductions, strategic investments, and exemptions.
Ultimately, handling taxes as a team not only encourages financial restraint but also fortifies the partnership. After all, having a well-planned financial life together guarantees that your marriage is founded not just on love, but also on long-term stability and shared success.
Got questions about taxes after marriage? Team Taxperts, the tax consultant in Kochi, are just a message away — reach out to us today!