Clubbing of Income - Loan for Shares

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Kapil Khanna (Querist)
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17 July 2011 I give an interest free loan to my wife of 1 lac. She uses it to trade in shares (futures & options) and generates income of 10k p.m. 1. Will this income be clubbed with my income?
2. If I charge interest on loan, can I avoid clubbing of income?

Please advise.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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17 July 2011 Since it is a loan, you have a discretion to receive it back, the only thing which may considered to be added in your income is interest on this loan, that too when the funds were borrowed by you by paying certain interest.

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Clubbing provisions are not attracted, now choice is yours.

If you are paying interest to any person on the amount borrowed, you may charge interest, otherwise there is no problem.

Kapil Khanna

Kapil Khanna (Querist)
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17 July 2011 The loan is from my accrued capital, so no interest on borrowings.
My only objective is that clubbing of income should not happen.
Please advise whether I should charge interest from wife or not.
Thanks.

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