How to save tax by investing in spouse name ??

This query is : Resolved

Rashmi (Querist)
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20 April 2012 Dear Friends,

Need help on the following case.

A 72years old Husband wants to do some Fixed Deposits and other investments in his wife's name (63years).

As I understand in this way eventually there will be a clubbing of income where the husband will be liable to pay the tax.

If I am not wrong husband can give loan to wife with some minimum or zero interest to avoid clubbing of income.

1. Can some one guide me how exactly this loan option can be exercised..??

2. Is there any Loan agreement to be made..???

3. Is the Loan agreement to be notarised or registered..???

4. Since there were few investment has already been done during June-Dec 2011 in wife's name, can those be included in the loan agreement or there should be separate loan agreement for new investment and another for those investment which has already been done..??

5. Is there any specific format of loan agreement (please share)

6. What is the max amount of loan and what is the max term of the loan..??

7. Is there any alternative option available to avoid clubbing of income in this case..??

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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20 April 2012 Amount and terms of Loan are decided on the basis of past experience of the lender with the borrower, specially when the borrower is a known person.
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Loans are not gifts.
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We have to see the purpose of loan as well as the repayment capacity of the borrower also.
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If I can get more or similar return from the same investment, the purpose of giving loan to my wife clearly indicates that I am fishing with the tax provisions and knowingly putting myself in trouble on a bad day.

A prudent man will not adopt such tactics.
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Loan Agreements are not required between husband and wife as the agreement to live together covers all such trivial and temporary agreements.
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A husband may give loan to his wife for carrying on a specific business activity rather than for the purpose of a pure investment like option.