Siva (engineer) (74 Points)
23 November 2012I have read in different forums that one can give a loan to his wife (who is not earning) and make investments in her name to avoid clubbing of income. I also understand so long as wife pays regular intrest and the same is declared as income in her husband's return there is no issue. Is the understanding correct. If so
1) What is the minimum amount intrest that should be charged for this ?
2) What are the documentation needed to legalize this process?
ANUBHAV VISHNOI
(-)
(150 Points)
Replied 24 November 2012
Dear Siva,
If you want to give loan to your wife then you can definitely give but make sure if loan amount is rs 20000 or more it should be given through account payee cheque or DD. You can give interest free loan also. There is no need to charge interest from your wife on interest free loan.
Second thing, from your query it seems that you want to save income tax, therefore your concern is to divert money and give loan to your wife. Well Siva you can gift money to your wife also. There is no income tax on gift. From that amount your wife can invest anywhere and income from investment will be taxable in the hands of your wife. So it is the best option to save income tax instead giving loan bcoz in loan you have to do some paper formalities.
I hope this will help you.
Thanx
CA Anubhav Vishnoi
8750089567
Pankaj Gupta
(CA final & M.Com Student)
(3358 Points)
Replied 24 November 2012
Dear Mr Anubhav ......Don't you think that gifting money to wife will attract clubbing provision u/s 64(1)(iv)??
From my point of view...... tax will not be payble on the gifted amount........But the income so earned by wife from such gift will be clubbed in the hands of husband and no tax treatment in the hands of wife.
CAclubindia
