I am Prashant , IT Professional need help for above mentioned subjects
1. I heard from some sources that we can save tax by gifting money to parents (Above 65 years) - Is it true ?
2. If above point is true. What is the complete procedure. Like monthly I need to transfer money to them then while filling the return I need to show that details ?
17 April 2012
Let's assume that parents are senior citizens (above 60) and have no income. You can gift them any amount of cash for investing in high- return instruments such as senior citizen's savings scheme.
As senior citizens do not have to pay any tax for annual income up to Rs 2.5 lakh, the interest income does not become taxable unless it exceeds this exemption limit. This means you can invest up to Rs 25 lakh through each of your senior parents without any source of income if the annual interest or return is 10 per cent.
You can invest up to Rs 50 lakh through your senior parents and have a tax-free annual income of Rs 5 lakh. If your parents are above 80, they are entitled to tax- free income up to Rs 5 lakh per year for "very senior citizen" category introduced in the 2011-12 Union Budget. You can invest up to Rs 50 lakh through each of your "very senior citizen" parents in instruments that give 10 per cent annual return and avoid the tax for interest income up to Rs 10 lakh earned by both of your parents together.
This is not applicable in case of spouse. The gift given to spouse is not taxable in either hand. But if the money gifted to wife is kept as FD, then the interest earned on that FD would be clubbed in husband's income u/s 64.
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