How to earn tax free income

Everybody is interested to make money and moreover taxpayers are more keen to earn tax free income. There are some ways with you can earn tax free income.

USE INDEXATION TO NULLIFY TAX
High inflation has been a curse for investors in the past few years, but for some, it has been a boon. Tax rules allow inves- tors to adjust the cost of an asset to infla- tion during the holding period.

INVEST THROUGH A NON- WORKING SPOUSE 
If you gift money to your wife and it is invested, the taxman will club the earning with your income for the year. But if you invest in tax-free instruments like PPF or tax free bonds, there is no tax implication.

AVAIL OF MINOR EXEMPTION 
If you invest in a minor child's name, the income is clubbed with that of the parent who earns more. However, there is a small `1,500 exemption per child per year from such investments. You can avail of this for a maximum of two children.

TAKE HELP OF AN ADULT CHILD 
After a person turns 18, he is treated as a separate individual for tax purposes. His earnings are no longer clubbed with his parent's income. Save on tax by investing in the name of an adult offspring.

PARENTS CAN HELP TOO 
Your parents can also help you avoid the tax net. If any or both of your parents do not have a high income, while you are in the highest 30% tax slab, you can invest in their name to earn tax-free income. Such income is not clubbed.

REVIVE YOUR FORGOTTEN ULIP 

Most of us have Ulips in our portfolios and many of us have stopped paying the premium. If you are part of this crowd, you can use your Ulip to earn tax-free income. Pay all the pending premiums at one go and earn tax free returns. 7 FORM AN HUF WITH INHERITED WEALTH Double your basic exemption andsavings limit simply by establishing a Hindu Undi- vided Family (HUF). The tax authorities treat the HUF as a separate entity. It is entitled to the same tax benefits.
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About Nitin Aggarwal

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