When planning for an efficient tax proposition, take into account your parents who can play a crucial role in the same. Adults have the luxury when it comes to basic tax exemption limits and so does your parents. Particularly when they are above 60 years of age, they fall under the Senior Citizens category for tax calculation purposes. They are eligible for a tax exemption limit of 3 Lakhs per year. When one or both your parents are not in the high-income bracket, you can use this non-taxable status of theirs to your benefit. Make investments in their names which will not be considered as your taxable income but theirs.
Even if you gift them, the same will not be taxed & Invest in All those avenues where income is tax exempt.You can invest in your parents’ name through the Senior Citizen Savings Scheme if they are above 60 years of age but will be taxable. The yield out of this investment will be at higher than other Fixed Investment Avenues. You can consider investing in the Public Provident Fund (PPF) on your parent’s name the income out of which is totally exempt from tax. A maximum of Rs. 1,50,000/- can be invested in your each parent name every year if you have invested to the maximum limit in your name. You may also consider investing in Mutual Funds on your parents’ name. As long as you do not cross the basic exemption limit,capital gain will not attract the tax at any point of time.
If the property you are dwelling in belongs to your parents then you can pay rent to them. Ensure that the property is in your parent’s name before going in for this option. If the property in the name of both your parents, it eases out the taxation front to a major extent. Assuming that you are paying a rent amount of Rs. 25,000/- per month to your parents, for a year it is 3 Lakhs. Taking into consideration 30% deduction, the taxation limit will be just 2.10 Lakhs which will be added to their taxable income. If your parents are not earning and the rent is their only income it is a nil tax scenario in this case. If their overall taxable income exceeds their exemption limit, help them invest the same in PPF, Mutual Funds or Senior Citizen Saving Scheme.
Under Section 80D of the Income Tax you can claim up to Rs. 25,000/- deduction for Premium paid For Parents every year. Get your parents a health insurance policy which is one of the simplest ways to save on tax. If your parents are above 60 years of age and fall under the senior citizens category, the deduction is Rs. 50,000/- per annum.
This tax deduction on Heath Insurance policy for your parents can be availed over and above claiming one for Your family.Tax deduction for investment in Health Insurance for parents can be claimed even if your parents are not financially dependent on you.
