Loan to wife to save income tax

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Rajesh2345 (Querist)

30 June 2012 Dear experts,

I have following query regarding giving loan to wife .
This i am asking as i am earning saving bank interest in idle amount in bank and for that i have pay incometax at my tax bracket.

1) I am in 30% income tax bracket
2) My wife do not have any income

Can i give Loan to my Wife (around 1 Lakh) and make loan agreement in plain paper saying that loan is interest free and will be payable on demand.

The Loan amount will be invested in Fixed deposit in bank and as she is not having income , she will not be liable to Income tax.

Thank you.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

30 June 2012 Legally, the income earned on FDR may be clubbed in your hand if you do so.
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In case your wife is not having any income, she can have some money out of savings made by her from the pin money, i.e the amount received by her from you for meeting her personal as well as household expenses.
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You may withdraw the amount from your bank account accordingly and give her. She can deposit the same in her Savings account.
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You may gradually withdraw the amount and give her, but not at a single stroke.
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