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Fd on wife's name

Pradeep Kumar (director) (65 Points)

28 June 2014

Hello,

I am a salaried employee with a MNC firm.

I have been transferring large amount of money to my wife's account (several transactions over a period of 3-4 years) out of my salary account and have created fixed deposit accounts in her name in different banks.

Last year while filing my income taxes, I had clubbed the interest earnings from her fixed deposit along with my own taxes (salary + equity gains). However this year, I am planning to file our income taxes separately as clubbing my wife’s interest income with my own income is resulting in a huge income tax.

I would like to know if I could consider the money I transferred to my wife as "loan given to her".

Please advice on the best options for me regarding this. Really appreciate your help on this.

Thank you,

Pradeep

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9 Replies

CA. Kuldeep Singhi (Entrepreneur) (424 Points)
Replied 28 June 2014

Yes in this case income will not be clubbed

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Pradeep Kumar (director) (65 Points)
Replied 28 June 2014

Thanks but from whatever I have read, it seems like I must club my income with my wife if my transferred money is used for earning interest on fixed deposit.

Please help me understand this better.

Thanks, Pradeep

1 Like

CA Madhvi (...Blissful...) (1658 Points)
Replied 28 June 2014

You can give this money to your wife as gift.beacuse gift received from relative is exmpted so such income would not be taxable but yes income eraned from such gift would be taxbale in hands of wife.

Pradeep Kumar (director) (65 Points)
Replied 28 June 2014

Thanks but from what I have read, gifts in excess of 50K cannot be considerd, i have transfred a lot more than this.

Please advice.

tme s limted,bt drms r unlmtd (Mba ( fin.) Ca final Student) (257 Points)
Replied 28 June 2014

interest on the deposit out of gifted money is clubbed in your hand ,

But if you give loan and nominal interest will be paid by her regulary then income earned out of such loan it is not clubbed at all.

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Pradeep Kumar (director) (65 Points)
Replied 28 June 2014

Actually I have made too many transactions to my wife's account for several reasons and it is very difficult to figure out how much loan I gave her (rather how much I should condider as loan given to her). I am not sure, how I could solve this problem; seems like clubbing is the best option. Please advice, I really appreciate your thoughts.

Thanks, Pradeep

abhishek (CA FINAL) (274 Points)
Replied 29 June 2014

Dear Pradeep,

First up money transferred by you to your wife's account is not taxable in her hands irrespective of the amount.The limit of Rs 50000/- is not applicable to relatives.

Second the money is invested in Fixed Deposit and the interest earned will have to be clubbed in your income.But, if you could show that the interest earned on the Fixed deposits on your Wife's name was further invested in some FD again in her name.Then the interest earned on the FD created from the interest earned from the money originally transferred by you to your wife's account will not be clubbed in your income and can be filed as income of your wife. eg you transferred say 10 lacs to your wife's account and then created FD and on that she earned 1 lac interest .This interest will be clubbed with your income.Now if she reinvests Rs 1 lac and earns Interst on that 1 lac.That income will not be clubbed in your income.

Raman (AGM) (21 Points)
Replied 30 June 2014

I agree with Abhishek

Yuvraj singh bhatia (CA Final) (50 Points)
Replied 30 June 2014

Agreed with abhishek...simplest way to get rid of clubbing....get the money invested by her in her own name in property, investments, shares and stuff....and do keep track of how much money u have given...will help in future

Regards