Make overdraft limit on Fd which is made by gifted m money

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This discussion clarifies the complexities of obtaining an overdraft limit on a Fixed Deposit (FD) funded by gifted money from family. It explains that the business owner will pay interest on the overdraft, while earning interest on the FD. However, a key complication arises with 'spouse clubbing provisions', meaning interest earned on the portion gifted by a spouse may be taxable in the spouse's hands, even if the business owner pays the tax. The advice is to understand these provisions to ensure correct tax reporting.

Jyoti

Jyoti (Querist)
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04 April 2021 I want to fullfill my financial requirment for my business to make a overdraft limit on a FD this FD amount money is come from as a gifted money; which come from my father mother and from spouse, in this FD 90% share is of above relatives and 10 % share is mine ; what kind of complications in this kind of transaction ?
Kindly suggest me what to do who pay interest on overdraft limit and who take interest on FD ?
I am confused; please guide me .

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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04 April 2021 You have to pay interest on over draft limit as it's used for your business. You can take interest on FD as the money is gifted to you. But on the interst on FD portion of money gifted by spouse clubbing provisions applicable.

Jyoti

Jyoti (Querist)
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04 April 2021 What is spouse clubbing provisions

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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04 April 2021 Income earned on gifted amount will be clubbed with the income of the spouse.

Jyoti

Jyoti (Querist)
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05 April 2021 If I make 10000 thousand fd on spouse gifted money portion and then take overdraft on it then who pay interest and who take interest ?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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05 April 2021 You pay interest on such over draft and take interest on Such FD. But the interst on FD is taxable in the hands of spouse.

Jyoti

Jyoti (Querist)
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05 April 2021 I pay incometax on fd interest they why my spouse also pay income tax on interest I am taking the responsibility to pay incometax on fd amount, government need tax which is paid by me is their any issue

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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05 April 2021 In your case it's okay you pay income tax but in many cases spouse who received the gift don't have taxable income that's why government introduced clubbing provisions.
Exclude the amount from your taxable income.

Jyoti

Jyoti (Querist)
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05 April 2021 Now sir in my case if I pay incometax on fd interest amount then their is no need to pay incometax from my spouse .

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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05 April 2021 No, clubbing provisions applicable such income is also taxable in hands of spouse. So exclude such income from your tax calculation.

Jyoti

Jyoti (Querist)
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05 April 2021 Ok sir thankyou very much

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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05 April 2021 You are welcome..............