POSTED BY June 21, 2013 2:40 pm COMMENTS (3)ON
I wish to give X amount to my parents for their monthly expense. Giving this amount on a monthly basis doesn’t help as it will not fetch much interest. I plan to open an Fixed Deposit in my parents name and keep myself as the secondary FD owner. The interest earned on this will be deposited to a savings account where my parents will be the primary account owner and I will be the secondary owner.
My understanding is that the interest earned here will be taxable to my parents and not to me. Considering they are senior citizens and with no other income, they save on tax and can use the entire interest for their expenses.
Is this a correct?
Thanks & regards
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3 replies on this article “Query on Income Tax”
Dear Vijay, Yes is the answer. You can become joint account holder for the easy redemption purpose in the absence of your parents later.
#1 – I read about how the Nominee part works. The suggestion is to have a Will rather than a Nominee to avoid future conflicts. Thus having self as the second account holder is a better option is what I felt.
Can’t I still gift it to them and then get it deposited as a FD with self as a joint holder?
#2 – Agreed.
You are correct. However technically the money should be a gift to parents above 60.
1. Make yourself the nominee and not the second account holder (this wont then be a gift!)
2. As long as the interest income is below their taxable limit they need not pay tax.