Save ItThrough Family Members

HOW TO SAVE INCOME TAX THROUGH YOUR FAMILY MEMBERS? WHAT YOU MUST KNOW Saving tax through family! Surprised! Yes, we can save tax through our family members, i.e., parents, major children and wife. To save tax through family members we need to invest in ways that our tax burden shifts to our family members and we can take the benefit of income tax slabs. Saving tax through family means not only saving in tax but also means higher post-tax returns on your investment. Here is how we can save tax through our family members. Save tax through parents You can save tax through parents as well as through parents-in-law. To achieve this goal, you need to give away a portion of your funds, either as a gift or a loan, to your parents as well as your parents-in-law so that in years to follow your income tax burden becomes lighter as the income on funds transferred by you to them would bring in income which would be taxed in their hands. Let’s assume that both your parents are senior citizens. Here’s how you go about it. Income tax deductions allow senior citizens a tax-free income of Rs 3 lakh. To exhaust this limit, say, you gift `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 8.3% and pays interest every quarter. Each will get yearly interest of nearly `1.2 lakh. If they invest the remaining `13 lakh each in the State Bank of India’s (SBI) fixed deposit (FD) of eight years (at an interest rate of 7.25%) that pays interest each quarter, it will fetch them each an income of nearly `0.95 lakh annually. That means your parents have individually earned `.215 lakh each year. With the tax-free limit at `3 lakh they don’t even need to file tax returns.