The Tax Life Cycle — From Birth to Death

Understand how income tax compliance at each stage of your life among 9 major life events from birth to death, would make you see the bigger picture and perspective. In turn, it helps with wealth creation and improved financial planning.

1. Birth

The individuals are not affected by the taxation at the time of their birth. On reaching the age of 18, all individuals are obligated to submit income tax returns when they meet certain criteria. Children under the age of 18 will be regarded as minors, and their earnings will be combined with those of their parents.

People who have children, on the other hand, can plan to make investments in their children's names only, which will help them file and optimize their own taxes.

Some of the investments are as follows

Sukanya Samriddhi Scheme – Available for Girl Child under 10 years of age. The maximum investment in a year is Rs 1.5 lakhs. Deduction can be claimed u/s 80C.
ULIP: Deduction can be claimed u/s 80C.
LIC: Deduction can be claimed u/s 80C.
PPF/VPF: Deduction can be claimed u/s 80C.
Health Insurance: Deduction can be claimed u/s 80D.

Refer @ Best Income Tax Saving Investment Options for further information.

2. Education

There is no effect on people who are going to school because of taxes. However, the costs of education affect how much parents pay in taxes.

Tax Deductions on Education Expenses

Payment of tuition fees to any university, college, school or other educational institutions within India for full time education for maximum 2 children upto a maximum of Rs 1.5 lakhs can be claimed u/s 80C by the parents.
Parents can claim the education loan interest as a deduction u/s 80E if the loan is taken for the purpose of pursuing the higher education of the child.
Parents can claim Children Education Allowance upto Rs 100 per child per month upto a maximum of 2 children from his Salary u/s 10(14).

Tax Exemptions

If the student has received scholarship to meet the cost of education, then the scholarship is exempt in the hands of student.
If the student is earning any income from any manual work, own skill, talent or specialized knowledge, the student is required to pay taxes on his PAN irrespective of whether he is minor or major.

Learn more on Education related content to know more

3. Job & Career

Once the individual completes the education and attains the age of 18 years, he will step into his career and take up employment or business etc

The taxation will apply once the individual starts earning whether from employment or business. The individual can have different types of income like Salary, Rental income, Capital gains, business, other sources etc

Also refer to Job and Career related content to know more

4. Marriage

Marriage is very key point in anyone’s life. However taxes directly don’t impact the marriages. But the taxes can impact the marriage expenses and financial decisions associated with marriage

It is customary for Indian families to give gifts on any occasion.
Gifts received at the time of marriage is exempted from the income tax.
Gifts at the time of marriage can be in the form of money, immovable property, movable property etc.
There is no threshold for the marriage gifts.
However married couples must maintain a documentation for all the valuable gifts received at the time of wedding for Income Tax purpose.

Also refer to Marriage related content to know more

5. Divorce

Even though Divorce is sad part of the lives, taxes come into play in certain aspects related to divorce settlements and agreements.

When one partner gives money to another spouse, this is called alimony. This type of income is also called maintenance or spousal support.

Also refer to Divorce related content to know more

6. Business & Freelancing

In the years leading up to 2024, there was a big shift in the global order toward the east in geopolitics. At the same time, big changes in employment make job advancement less predictable.

You can start a new business around the middle of your life if you need to because you lost your job or something else unexpected happened.

When it comes to taxes, running a business is very different from being an employee. It is very important for both people and businesses to pay their taxes on time.

Areas a business or freelancing person should care about

Tax Planning
Business Compliance
Tax Compliance

Also refer to Business & Freelancing related content to know more

6. Retirement

Retirement is a significant milestone in one’s life which marks the end of professional life. The age of retirement varies and depends on the sector of organisation.

When a person is retiring, he will get the retirement benefits and the taxability depends on type retirement benefits.

Also refer to Retirement related content to know more

7. Old Age and Disability

People get more likely to have a number of health problems as they get older. More money will be spent on health care.

Since people have to pay for their own health care, the income tax system helps them. Some of the costs can be written off on their taxes.

Along with planning for old age and disability, it's important for a person to make a will to pass on his wealth to the next generation. Also, teach them about the rights and duties that come with inheriting assets and liabilities.

Disability : If the person is suffering from any disability as prescribed under income tax act, they can claim deduction u/s 80U. If the disability is less than 80%, they can claim 75000 and if the disability is more than 80%, they can claim 1,25,000
Treatment of specified diseases and ailments : If the person is incurring any expenditure towards specified disease or ailments , the person can claim deduction u/s 80DDB
Reimbursement of Health Insurance : If the person has already taken health insurance and if the health insurance company is giving reimbursement, the reimbursement is not taxable in the hands of the individual.

Also refer to Health and Disability related content to know more

8. Death

Death of the individual will bring an end to the life of the individual but it will trigger several legal and financial implications.

Even though the person is deceased, his tax implications will not come to an end. The Legal representative of the deceased is liable to discharge the tax liabilities of deceased person

Refer @ Tax Implications for a Deceased Person for further information.