Apart from these, there are certain indirect ways in which your parents can help you lower your overall tax liability. We tell you three such tax-saving methods, however, take note that these are particularly helpful to those whose parents fall outside the tax ambit or have considerably lower taxable income.

You can transfer your surplus to your parents under a gift deed and make investments in their name.

Basic tax exemption limit for senior citizens is ₹3 lakh, while super senior citizens aged 80 years and above get tax-free income of up to ₹5 lakh.

Further, interest income of up to ₹50,000 earned on deposits made in banks or post offices is exempt from tax for senior citizens. Even if your parents have income above the basic exemption limit, you’d still be effectively paying lower tax on the investments under their names as per their tax slab.

Cash gifts received from a child are exempt from tax and income earned from such investment will not be clubbed to your income for taxation. However, Sailesh Kumar, partner, Nangia & Co said if you have right over such income or power to control such investment, then such investment shall be considered to be revocable transfer and their income may be clubbed with yours.

 

Buy health insurance for parents

Under Section 80D, you can claim a tax deduction of up to ₹25,000 on premiums paid towards a health insurance policy bought for your parents who are aged below 60 years of age. For senior citizen parents, the deduction limit is ₹50,000.

Claim HRA even if not living on rent

If you live with your parents in a house owned by them, you can claim house rent allowance (HRA) tax exemption by paying them rent. The condition is that you should actually pay them rent and not have even partial ownership in that house. With the introduction of Annual Information Statement (AIS), the rent that you pay to your parents will appear on their AIS, which means that furnishing bogus rent receipts will be known by the tax department and get you under the taxman’s radar.