do you help your parents financially? I mean do you send money to your parent(s) on a regular basis? It could be because they have big medical expenses or have a very low regular income and hence need your cash flow?

Well, I do know of many people doing this – and the smartest way of doing this is is to transfer big chunks to them so that they can invest it and earn the money in their own name. Surely they must be paying lesser taxes.

Say you are 40 years old with a 63-year-old mother and an 83-year-old grandmother.

The best is to transfer Rs. 10L to your grandmom and Rs 10L to your mom. They then put it in the Senior Citizens saving scheme and earn say 7% tax-free (assuming they do not have taxable income EVEN after this income of Rs 70,000.

This is very useful because of this Rs. 20L will not have any clubbing or have any other tax implications. Of course, I am assuming that Rs 70000 is what they need from you. If they need more income, simply transfer more capital. No point in earning money, paying tax, and then giving away that money. I am assuming that you are earning (say) Rs. 35L and are taxed at a reasonably high bracket. One more important thing to do is to automate all their expenses – mobile, landline, electricity, gas, society charges – put it on a credit card, and make sure that the bills are paid on time. Also put your own expenses – rent, (if you had an emi it would be a direct debit), gas, telephone, society charges, children’s fees, children’s hobby classes (quarterly?), – you save a lot to trouble and about 50 cheque leaves a year, if not more!

Of course if you are not the only child make sure that you tell the other siblings about this, and make yourself the second holder. Make sure that your spouse is either the 3rd holder or at least the nominee.

Obviously this should be a debt fund with a 2-year duration, and you should be willing to top it up once in 3/4 years or as the need arises.

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  1. I did exactly the same thing (15L+15L in SCSS) about 4 years back, interest then was 9.3%. Not that they need the money, she has a small pension enough to sustain in a low cost small town, but this gives them peace of mind and me some tax savings! Btw, they haven’t used any of it until now, every year she simply puts all the interest earned into NSC 🙂

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