No. Money you send your parents is a gift from a relative, so neither you nor they pay tax on it, whatever the amount. Once it is theirs, the interest it earns is taxed in their hands, not added back to yours, which is where a retired parent's low slab saves tax: the table below shows how much at ₹15 lakh to ₹40 lakh CTC.
Why is money sent to parents not taxed?
A gift of money is taxed only above ₹50,000 a year from people who are not relatives (section 56(2)(x) of the 1961 Act). Gifts to relatives, which include parents, fall outside that rule at any amount, and India has had no gift tax on the giver since 1998. Sending money to parents every month, like Naveen's ₹25,000 for his father's household, does not make it their income.
The second rule is the clubbing of income. Section 64 of the 1961 Act adds back to your income what a gift earns when it goes to your spouse, your son's wife or a minor child. Parents are not on that list, so interest on money you give them is theirs to report at their own slab. Routing money through a parent to your spouse does not escape clubbing: section 64 covers indirect transfers.
Rent you pay them is different: it is taxable income for your parent, as HRA on rent paid to parents explains.
How much tax does an FD in a parent's name save?
Naveen, 34, earns ₹30 lakh CTC in Pune, about ₹1,81,400 a month in hand for FY 2026-27 under the new regime (CTC to take home). His taxable salary is ₹26,78,800, so extra income is taxed at 30% plus 4% cess: 31.2%.
His ₹20,00,000 in FDs, in his own name, would earn ₹1,40,000 a year at 7% (the same rate in both names); ₹43,680 would go in tax, leaving ₹96,320.
His father, 68, draws a ₹30,000 monthly pension from his former employer, ₹3,60,000 a year, taxed as salary with the ₹75,000 standard deduction: ₹2,85,000. If Naveen gifts him the ₹20 lakh for the same FDs, his income becomes ₹4,25,000 (₹2,85,000 plus ₹1,40,000). Tax on that is ₹1,250 (5% of ₹25,000 above ₹4,00,000), and the section 87A rebate (section 156 of the 2025 Act) cancels it, as it does any tax up to ₹12,00,000 of taxable income. The family saves ₹43,680 a year, and his interest could reach ₹9,15,000 a year before the rebate runs out.
The 7% is a senior citizen's rate (large banks paid seniors about 6.5% to 7.1% in October 2026, usually half a point above others). At 6.5% in his own name, Naveen would keep ₹89,440 after tax, so the move is worth ₹50,560 a year to the family: the ₹43,680 of tax, plus ₹6,880 from the senior rate's extra half point.
His father's income passes ₹4,00,000, so he files a return even though his tax is nil. With ₹1,40,000 of interest from one bank, above the ₹1,00,000 senior-citizen threshold, the bank deducts 10% TDS unless he gives it Form 121 (which replaced Forms 15G and 15H from 1 April 2026).
How much does it save at your salary?
The saving is your own rate on the interest, while your parent's income stays inside the rebate. Same ₹20,00,000 at 7%, FY 2026-27, new regime:
| CTC | Taxable salary | Your rate on the interest | Tax on ₹1,40,000 a year |
|---|---|---|---|
| ₹15 lakh | ₹13,01,900 | 15.6% | ₹21,840 |
| ₹20 lakh | ₹17,60,800 | 20.8% | ₹29,120 |
| ₹25 lakh | ₹22,19,800 | 26% | ₹36,400 |
| ₹30 lakh | ₹26,78,800 | 31.2% | ₹43,680 |
| ₹40 lakh | ₹35,96,700 | 31.2% | ₹43,680 |
A parent whose taxable income already passes ₹12,00,000 pays tax on every extra rupee, and the gain shrinks or disappears. Equity fund gains are taxed at special rates the rebate does not cover, though your parent has their own ₹1.25 lakh yearly exemption on long-term gains. FD vs mutual funds after tax compares the two at each slab.
What can go wrong when savings sit in a parent's name?
It has to be a real gift: money moved to their account, an FD they book, and a signed letter saying it is a gift. If the deposit stays yours in all but name, the interest is still yours, and a promise to return the money makes it a revocable transfer, whose income section 61 of the 1961 Act taxes on you.
Control passes with it. The money is your parent's to spend, lend or give away; getting it back means another gift.
Nomination is not ownership. Every FD in a parent's name should carry a nominee (banks allow up to four since 1 November 2025), but a nominee collects the money for the legal heirs, as the Supreme Court held in 2010 (nominee vs legal heir). Without a Will (inheriting without a will), the ₹20 lakh would pass to his father's legal heirs under the succession law that applies to the family, including Naveen, his mother if she is living, and any siblings. A Will makes that a choice.
Once it is theirs, it may also be what they live on: parents' retirement corpus works out what they need, and supporting parents financially what to send each month.
Dhi looks at your cash flow, net worth, protection and goals together, so money you send home is counted alongside your own savings. Dhi answers questions like this from your own numbers and nudges when something needs attention.
Frequently asked questions
This is general information for salaried individuals in India, not personalised financial advice.
