Gift provisions v/s loan provisons to relative

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This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

29 December 2012
Q.1 a person got 30 lac from retirement benefit in his retirement and he has invested 18 lac to fixed deposit in the name of his wife but now the interest on fixed deposit is going to be clubbed in his hands can he show as a interest free loan of that amount? and
Q.2 can he show the interest in his wife return? and
Q.3 if assessing officer ask a clarification how we prove it that it is a loan and not a gift if it is interst free loan?

Thanks
please do needful and oblige me

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

02 January 2013 The worst in the case has already happened as it is crystal clear that income will be clubbed in the hands of the Donor.
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The Ball is in the court of the AO, now.
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If you say that the transaction is a loan transaction, you are required to show loan agreement and its terms, repayment conditions etc. You may produce copy of ledger account, also. Meantime you may repay certain amount according to the terms, out of wife's other income.
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In my view, the AO still may not agree with your contentions.
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The best possible remedy is to give loan at a lower rate of interest to the wife.
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