Giving Loan to Spouse

Dear Raj,

It would be taxable in the hands of your wife.

However, the interest rate is very low. The same may be treated as gift and clubbing provision may be applicable.

It is better to give the loan as per market interest rate. 

No since it's not a gift but a loan it won't be taxable in your hand. According to section 64 if an amount is given as gift to spouse then only income earned from such gift is clubbed in spouses income.

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Thank you

Hello,

No, it won't be taxable in your hands since it won't be considered as a gift. FDs interest would be considered of your wife.

Advisable to charge interest at a reasonable rate(market) to avoid any issue.

I hope that this answer satisfies your requirement.

Regards,

CA Hunny Badlani

Hi Raj

Charging such rate of interest from your wife would be litigative. 

As we know, on transfer of funds to your spouse, any income arising out of such funds is taxed in your own hands. Diversion of income to avoid clubbing provisions won't be acceptable by the income tax department in case your case is picked up for scrutiny.

It is advisable to either club such income and pay taxes in your name or charge a higher rate of interest to your wife.

- FD interest would be taxable in your wife hands.