This is the simplest and most commonly used strategy to save tax through your parents. Buy a health policy for them and get deduction for the premium paid under Section 80D, upto Rs. 25000 from your taxable income (Increased the limit from Rs. 15000- in Budget 2015). If the parents are senior citizens, the deduction is even higher to Rs. 30000 (Increased the limit from Rs. 20000- in Budget 2015).
This deduction is over and above of Rs. 15000 that one can claim as deduction for the health insurance premium paid for himself and his family (spouse and children). This deduction is available irrespective of whether parents are financially dependent on the taxpayer or not.
If you are living in your parents house; you can pay them rent to claim House Rent Allowance (HRA) exemption. This is possible only if the property is registered in the name of your parents. Your parents will be taxed for the rental income after a 30% deduction i.e on the amount of rent paid by you. If the property is jointly owned by both the parents; then you can divide the rent so that the tax liability gets split between both the parents. If the income exceeds the basic exemption limit; you can help them save tax for investing in their name under Section 80C options.
You can claim Rs.60000/- or amount acutally paid whichevr is less, as deduction for medical treatment of your parents if they suffer from specified diseases (such as parkinson, dementia, cancer, etc) under section 80DDB.
If Your parents inocme is below basic exemption limit or in a lower tax brackets in comparision to yours. The basic exemption limit for senior citizens is Rs. 3.00 lac and super senior citizens is Rs. 5.00 laca year. If any or both of your parents are do not have high income and you have funds to invest, you can avoid tax by way of gift to them which can be invested in their name. There is no tax on such gifts and the income from the investments will be treated your parent's income. If any of your parents have no income and so in this way can essentailly earn a tax free income of Rs. 3 Lac and if they invest in a tax saving schemes under section 80C, they can earn upto Rs. 5.5 lac a year without paying tax.
There are plenty of options for investments and also attractive interest rates are being offered to senior citizens's saving schemes.
If your parents' income is less than the basic exemption limit, the short term capital gains tax will not attract tax liability in their name. So you can open a demat account in their name and trade in stocks