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Fixed deposit interest

16 April 2016

what will be the effect in case a fixed deposit held by a major child who is not working and has a joint account with his parent having second name ?will the interest income be of the child? and if yes can he give form 15 h to the bank ?

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7 Replies

Tribhuvan Aditya Singh (Student as well as Self-employed) (3710 Points)
Replied 16 April 2016

the income will be clubbed in the hands of earning parent irrespective of the fact whose name is jointly attached with child.

Vishal Goel (Chartered Accountant) (1693 Points)
Replied 18 April 2016

Hello Singh Ji

Child is major...Why clubbing provision will be apply here ??
Plz explain

Tribhuvan Aditya Singh (Student as well as Self-employed) (3710 Points)
Replied 18 April 2016

because he is a non earning member of the family. and when any fd is on his name, it means that any earning parent has done it on his name. in that case any intt income on that fd will be clubbed in the hands of earning member otherwise it will amount to diversion of income.

Ritin Suvarna (13 Points)
Replied 18 April 2016

can it be called as gift to son for meeting his education fees and hence not taxable as parents income

Tribhuvan Aditya Singh (Student as well as Self-employed) (3710 Points)
Replied 19 April 2016

yes, treat it as gift and then its fine.

Vinay somani (CA, CS) (Assistant Manager-Accounts) (549 Points)
Replied 19 April 2016

as per my view if we see the case deeply the second question arise that if father gift the money to son then why FD is in the name of both.(Joint Acnt)

AO can arguee that this is pure transfer of income.

Tribhuvan Aditya Singh (Student as well as Self-employed) (3710 Points)
Replied 19 April 2016

@ vinay ji.. you pointed out correctly, but there is no prov. in the act to club income after it has been gifted to major son. so according to me, even if AO argues on this point, then it can be said that since in the absence of any prov. for clubbing, the transaction is valid and it lies with discretion of major child as to how to dispense with it. and also the first holder in fd is child's name thus AO would have no chance to agrue much.

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