Every parent wants to ensure the bright future of their child. Well, you can invest in your baby name. This will help to solve two purposes- one you will be able to save for your child’s future as it can meet the child’s education as well as other needs. Second, it will also help you save tax.
Investment in the name of children in Public Provident Fund (PPF), Sukanya Samriddhi Yojana, which is for the girl child, life insurance schemes and some mutual funds will help build a huge corpus for them in the long run.
“You can invest in the name of your minor child to fulfill their financial goals like education and marriage. Income from these investments, either through dividends, interest or capital gains, is added to the income of the parent who earns the higher income. This is called clubbing of income. In addition, this income is taxed as per the applicable income tax bracket of the parents,” said Archit Gupta, Founder & CEO – Clear.
tax saving instruments
“You can invest in a PPF account in the name of your child. It is eligible for the purpose of deduction under section 80C to the extent of Rs. 1.5 lakh. The interest earned on investment in PPF is also tax free. Also, investing in specified mutual funds, Sukanya Samriddhi Yojana, ULIPs or taking a life insurance policy in your child’s name can help you avoid taxes by claiming these as deductions under section 80C. In addition, the premium paid for a medical health insurance policy taken for your child is allowed as deduction under section 80D,” said Abhishek Soni, Co-Founder & CEO, Tax2win.in.
Invest in PPF, Sukanya Samriddhi
“You can choose investments like PPF and ELSS which qualify for section 80C income tax deduction 1.5 lakh per annum. PPF qualifies for the EEE income tax regime, where the interest earned and maturity amount is tax-free, in addition to the Section 80C tax deduction. Also, from ELSS to long term capital gains 1 lakh is tax-exempt,” said Archit Gupta.
You can open Sukanya Samriddhi Yojana in the name of your minor girl child below the age of ten years. “It allows maximum investment 1.5 lakh per financial year and eligible for section 80C tax deduction. In addition, the interest earned and the maturity amount are tax-free,” Gupta said.
opening savings bank account
you can claim 1,500 exemption per minor (maximum 2 minor children) child for any income earned from investments such as bank FD or savings bank account, and other investments in the name of your minor child, Gupta explained.
Tuition fees expenses
Are eligible for tax exemption up to tuition fees 1.5 lakh under section 80C.