Gift to mother, interest on fd

You can save tax through our own parents.You needs to give away a portion of your funds, either as a gift or a loan, to your parents so that in years to follow your income tax burden becomes lighter as the income on funds transferred by you to them which would bring in income would be taxed in their hands.

Assuming that both the parents are senior citizens. Here’s how you go about it. Income tax deductions allow senior citizens a tax-free income of Rs 2.5 lakh. To exhaust this limit, say you gift Rs 28 lakh to each parent in cash. Of this, both can individually put Rs 15 lakh in a senior citizens savings scheme that earns a return of nine per cent and pays interest every quarter. Each will get yearly interest of nearly Rs 1.4 lakh. If they invest the remaining Rs 13 lakh each in the fixed deposit (FD) (say at an interest rate of 7.5 per cent) that pays interest each quarter, it will fetch them an income of nearly Rs 1 lakh annually. That means both parents have earned Rs 2.8 lakh from the senior citizen saving scheme and another Rs.200000 from  deposits each year. A total savings of Rs 4.8 lakh – the tax-free limit (Rs 2.4 lakh) that each parent enjoys. So, they don’t even need to file tax returns.

You need not pay any tax for the said amount.