When it comes to income tax, the husband and wife are not one mind and one soul.

So it's always better to have separate joint accounts, one for the husband and the wife and the other for the wife and the husband, even if one of them is not assessed for income tax.

Buying a House

Do not buy any housing property, residential or otherwise, in the name of the spouse with your funds. Do not do so even if you already possess a house.

This may create some insurmountable difficulties in claiming the tax concessions on housing loans. The loan is always given to the owner of the house and being a co-applicant does not entitle one to the concessions.

If both contribute towards the purchase, care should be taken to ensure that the share of each one is separately ascertainable to enable each co-owner to be separately assessed in respect of Sec. 88 rebate and deduction u/s 24 for loans and also in respect of capital gains when the house is sold.

Housing finance

Even if you have the wherewithal to purchase your own house, it is better to opt for housing finance. Tax breaks are available only on borrowed funds and not on the use of owner's equity.

Moreover, in most cases, you will find that the direct cost of borrowing is much less than the tax saved.

Life Insurance

Life insurance is a necessity, if and only if, the demise of the breadwinner would put immense financial pressure on the family members left behind.

If that is not the case, leave insurance alone. Every product has its cost and so does insurance. Do not buy a product you do not need or buy excessive insurance, which injures your financial health.

In your effort to provide for the future of your family, do not rob it of its present! Insurance is like a life saving pill that is to be administered only when you need it.

Otherwise, the side-effects of the pill may be worse than the imaginary disease. In any case, do not buy life insurance only because it forces compulsory savings or it saves taxes.

Do not buy insurance for your child. The child's death, howsoever devastating on your emotional health, would make no difference to your financial status.

If you are so inclined, make investments in the name of the child such that by the time he/she becomes a major the funds would come in handy for needs such as further education etc.

If you do need a life cover, go in for low-premium, high-risk policy such as term insurance. Do not backdate any policy, thereby covering life for a period when you were very much alive.

Mediclaim

Mediclaim is a must for all, taxpayers or otherwise, rich or poor, in view of the high cost of hospitalisation. Fortunately, Section 88D offers coveted deductions.

It is more than a must for those going abroad, even when there are no tax concessions.

Equity-based MF schemes

Do not reject equity-based schemes of MFs totally. There are some schemes, which have put up spectacular returns over a period of as long as five years.

The one and the only disadvantage is the risk factor. The fortunes of equity-based schemes are linked closely with the market and its associated volatility.

One can get very good rewards but the possibility of losing one's shirt cannot be lost sight of. However, keep in mind that one can only lose one's shirt, if one invests all the funds in equity.

Therefore, do take exposure, but in a limited way that your risk appetite allows you.

Gift to spouse

The main advantage of gifts by a husband to his wife who is a housewife or by a wife to her husband who is also in a 'similar' situation, accrues from the fact that in the case of spouse (or daughter-in-law), income on income is not clubbed.

If the spouse has no other income, no tax is payable unless the interest on interest crosses the minimum threshold of Rs 50,000. In other words, instead of investing in your own name, and pay tax thereon, it is better to give a gift, pay tax on the original corpus gifted and keep on building a corpus for your spouse.

Incidentally, savings made by the wife out of household expenses given by her husband would be separate property of the wife. Any income arising therefrom cannot be aggregated with the income of the husband.

Gift to minor children