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Tax planning in the chapter of clubbing

10 March 2012

Suppose Mr. X gets Rs. 50 lacs on his retirement. He invests this money in FD's. Now its obvious that Interest income on these FD's is taxable. Now Mr. X wants to transfer FD's amounting to Rs. 30 lacs, under a Gift Deed, to his wife, so that Interest income on this 30 Lacs gets taxable in her hands only, not in the hands of Mr. X.

How can we plan this arrangement without attracting Section 64. Please Guide..

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2 Replies

Suguna (VP) (98 Points)
Replied 12 March 2012

income from any amt transfered to spouse for in adequate consideration wold get taxed in the hands of the transferor. it is impossible to avoid this provision of sec 64. all u could do is reinvest the interest income so that income from that amt is not taxed in the transferors account.

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CA Milan Goel (Job) (50 Points)
Replied 13 March 2012

Thanks Suguna For Replying.

Actually, This situation has been given to me by Chartered Accountant with whom I'm employed. I also came up with the same solution, but............u know :) u can't give "Not possible" reply to ur CA just like that. Thats why I put it here, if any of the Tax experts could help me out.

But Still thanks for ur consideration.