Clubbing provisions on gifts/loans to spouse

[catcat]

I wish to apply for IPOs & take part in buybacks through spouse's account, to take advantage of the "small investor" provisions. I am trying to understand the tax treatment of all this.

My spouse's tax rate is significantly lower than mine.


Let's say I give her some money, and she invests in an FD. I assume the clubbing provisions will be attracted, and the interest will be taxed at my rate.

Will the same provision apply for an IPO - if I give her 15,000, and, say, she makes a profit of 5,000, who will be taxed?

Let's say I take the principal back, (basically give an interest free loan) what will be the tax treatment?


On this note, do similar clubbing provisions apply to parents?

 

[SHUB11]

Dont ponder too much...Just Do It...

I used to think a lot and paid income taxes even on saving account interest while my friends used to avoid even capital gains tax by not disclosing (not now but two three years back).

So as long as you are in job and earn salary its OK to transfer funds to wife and parents and show it as gift. No need of any clubbing provisions or shit.

These are rules only to catch HNIs doing hanky panky stuff.

 

[Vishal N]

I wish to apply for IPOs & take part in buybacks through spouse's account, to take advantage of the "small investor" provisions. I am trying to understand the tax treatment of all this.

My spouse's tax rate is significantly lower than mine.


Let's say I give her some money, and she invests in an FD. I assume the clubbing provisions will be attracted, and the interest will be taxed at my rate.

Will the same provision apply for an IPO - if I give her 15,000, and, say, she makes a profit of 5,000, who will be taxed?

Let's say I take the principal back, (basically give an interest free loan) what will be the tax treatment?


On this note, do similar clubbing provisions apply to parents?

Just gift it and invest in her name. Do not make any unofficial loan or something, even mentally. No tax on gifts in family, irrespective of amount.

Make sure wife is aware of all investments in her name, and also the reason for X investment in A fund or B bank. She can say investment was due to her knowledge, think clubbing won't apply then.

Disclaimer: not a CA

 

[catcat]

Thanks for your help. I've studied the provisions, and can make something work.

Now the trouble is that she's a (state) government employee, and is dead scared of corruption allegations (which she has no reason to be) - she's squaky clean, and all my income is from salary & investments and is properly accounted for.

Anyway, thanks for your help, and let's see how it goes. Goes without saying that I do this for parents (and to the best of my knowledge no clubbing provisions here).

 

[Vishal N]

Thanks for your help. I've studied the provisions, and can make something work.

Now the trouble is that she's a (state) government employee, and is dead scared of corruption allegations (which she has no reason to be) - she's squaky clean, and all my income is from salary & investments and is properly accounted for.

Anyway, thanks for your help, and let's see how it goes. Goes without saying that I do this for parents (and to the best of my knowledge no clubbing provisions here).

You can show her provisions that state that any gift of any value, cash or assets are tax free among family.

Make her understand how the investments work to reduce her worries