Loan to spouse 20 lacs

This query is : Resolved

Raghu9 (Querist)
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06 May 2014 Dear Experts

Can a husband give interest free loan to his wife? If yes then how by cash or by transfer amount in wife's account. Please explain the whole procedure in brief. Please provide loan agreement and tell to whom I or my wife show this agreement, to bank as income source by wife or to Income tax department by me and wife that I give loan and she receive the loan ? Loan amount would be 15 to 20 lacs.My wife has no other income.

If my wife invest this money in FD or any other instruments then me or she liable to show this in our return or not.

Thanks

Shivang Chokshi

Shivang Chokshi (Expert)
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07 May 2014 do not show it as loan to wife.. show it as gift.. you can simply make a gift deed and get franking done as a paper tool to back up your gift transaction.. if you show it as gift, your wife need not give you interest on it.. loan cannot be given in cash for more than rs. 20000/- thus gift would be a better option in that case too.. make sure you have sufficient cash in your books if you plan to give a cash gift.. i would advice to give a cheque to your wife..

secondly as per clubbing provisions, any interest income received by your wife on such money given by you will be taxable as your income and clubbed in your income.. any income on investing such interest income will be your wife's income..