Section 64(i)(iv)
This query is : Resolved
ashish kumar dwivedi
(Querist)
15 June 2014
Original Situation
Mr.A in taxable limit . he transfer Rs 10,00,000/-( According to section 56 (2) vii any sum of money received from relative is exempt) to his wife fixed deposit bank account. During the year Mrs A earn interest of Rs 80,0000/- .Mrs. A has no other income
Mr A want to save himself from clubbing provision.
Suggestion
Mrs. A make a loan agreement of Rs.10,00,000/-(in non judicial stamp paper) with Mr A on 1.4.2013. According to agreement Mrs. A pay interest on such loan (at year end) to Mr. A @ 0.1% .so this arrangement can not to be said as gift. Mrs. A make his B/s and profit and loss a/c in following manner.
Balance sheet of MRS A (Proprietor)
(for the year ended 31.03.14)
Loan from Mr. A 10,00,000/-
Investment
Fixed deposit in SBI
Fixed deposit in CBI
5,00,000/-
5,00,000/-
Profit and loss a/c
(for the year ended 31.03.2014)
To interest paid to Mr A @ 0.1% 1000/-
To net profit 79,000/-
By interest received from
SBI 40,000/-
CBI 40,000/-
Please tell me whether the above agreement of loan between Mr. A and Mrs. A is said to be “adequate consideration”?
Can Mr. A save himself from section 64(i)(iv). ? Whether this type of tax planning is possible. If not than what is best alternative.
Mr.A in taxable limit . he transfer Rs 10,00,000/-( According to section 56 (2) vii any sum of money received from relative is exempt) to his wife fixed deposit bank account. During the year Mrs A earn interest of Rs 80,0000/- .Mrs. A has no other income
Mr A want to save himself from clubbing provision.
Suggestion
Mrs. A make a loan agreement of Rs.10,00,000/-(in non judicial stamp paper) with Mr A on 1.4.2013. According to agreement Mrs. A pay interest on such loan (at year end) to Mr. A @ 0.1% .so this arrangement can not to be said as gift. Mrs. A make his B/s and profit and loss a/c in following manner.
Balance sheet of MRS A (Proprietor)
(for the year ended 31.03.14)
Loan from Mr. A 10,00,000/-
Investment
Fixed deposit in SBI
Fixed deposit in CBI
5,00,000/-
5,00,000/-
Profit and loss a/c
(for the year ended 31.03.2014)
To interest paid to Mr A @ 0.1% 1000/-
To net profit 79,000/-
By interest received from
SBI 40,000/-
CBI 40,000/-
Please tell me whether the above agreement of loan between Mr. A and Mrs. A is said to be “adequate consideration”?
Can Mr. A save himself from section 64(i)(iv). ? Whether this type of tax planning is possible. If not than what is best alternative.
Nikhil Kaushik
(Expert)
15 June 2014
while giving money through loan is sufficient, you could do well by increasing the rate of interest...
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