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I was looking for saving tax by investing/gifting to parents. My father/mother is paying tax, instead can I gift my money to grandfather to save tax ?

Grandfather does earns so easily 20 lakh could be deposited, if it was tax free.

  • As a general rule (don't know specifics of India, nor how well they police such things): if you truly gift something, there's no guarantee you will get it back. If there is at least an "informal agreement" that the money will be paid back, then tax authorities tend to take a dim view of this and treat it as tax evasion. – TripeHound Oct 19 '18 at 8:51
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so easily 20 lakh could be deposited, if it was tax free.

You have to pay taxes and then gift. Any income generated will be taxed in the hands of grandparents.

So if you get a salary of 20 lacs, you pay taxes on 20 lacs, say approx. 5 lacs. From the remaining 15 lacs, say you gifted your grandparents.

If your grandparents invest this and generate an income of 1 lacs, they have to pay taxes as per tax bracket, zero in this case if there is no other income.

As pointed out by triplehound in comments, once gifted, the money belongs to grandparents. They can spend it, invest it, gift it to anyone. It may or may not come back to you.

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