Naman (Accountant) (339 Points)
31 December 2010A father deposited an amount of Rs.1000000.00 in the name of his minor son. The interest from this deposit was taxed in the hands of the father as per clubbing income provision. Now, the son is adult, tell me in whose hands the interest will be taxable?
U S Sharma
(glidor@gmail.com)
(21056 Points)
Replied 31 December 2010
as the principal belonged to father only , interest would get taxed in hands of father only
Vivek Raju P
(Manager)
(614 Points)
Replied 31 December 2010
The amount will be taxable in the hands of the father, as this can be contended as a revocable transfer. This is just a deposit and at any time may be withdrawn and can be paid to father. It is really difficult to prove that this is an irrevocable transfer of assets and sec 61 will apply.
In my view it may be possible that the father can take the money and make a gift deed in the name of the son, which will not be taxable in the hands of the son u/s 56(2) being transfer to a lenial descendant. The son may take the money and invest in his own name (assuming that he falls below the maximum amount not chargeble to tax, or is in lower tax bracket than father.
NARAYAN
(Ca final)
(40 Points)
Replied 03 January 2011
Hi
According to my Opinion he income from the deposit cannot be charged with the adult son the same to be clubbed in the hands of father.
safal
(Articleship)
(80 Points)
Replied 06 January 2011
CA MAULIK
(C.A)
(937 Points)
Replied 07 January 2011
Continue to club the int in the hands of father.........
Member
(Management)
(325 Points)
Replied 07 January 2011
As long as the source / ownership is with the father, there is no way he can escape tax liability. I don't think that gifting the money would solve the problem as clubbing provisions will still apply.
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