POSTED BY January 17, 2011 11:15 am COMMENTS (4)ON
Happy pongal! [belated] 🙂
I’m in 30% tax bracket, I’d like to invest more on my wife and kid’s names. I’d like to know the ways to invest to get rid of Clubbing of the income which is generated by that investments.
I’ve 2 options as of now:
1. Investing 70,000 [in total 1,40,000] in thier PPF accounts respectively.[ I’ll invest another 70,000 in my PPF a/c also], so the generated income will be into my daughter’s hand [she will get majority by the time of maturity of this] and the income generated from this is fully tax free [as of now].
2. Investing 2 lakhs on my wife’s name and kid’s name in MF’s which will be for Long Term, So the income generated from these MF’s after one year will be tax free since they will fall under Long Term Capital Gains. So the income from this investment is tax free if it is LTCG [as of now, Not sure after DTC comes into picture].
In your article https://www.jagoinvestor.com/2009/09/what-are-income-clubbing-provisions-and.html you have mentioned in Pt.4 “#4 Give a Loan to your Spouse or Child , not a Gift“. Can you please explain in more detail like
1. How to do it for Spouse, what should be the interest rate which will be acceptable to the Income Tax dept guys, do we need to show through bank that my spouse has paid her interest regularly ?
2. How to do it for Kid, As you said if we put it on the paper with our signatures that will do. Will my minor kid’s signature is valid? or As a gaurdian can my wife sign on it on behalf of my kid? How we can show the interest payment for IT records?