Interest on FDs booked by Housewife

POSTED BY Debojyoti Das ON August 29, 2013 12:43 am COMMENTS (8)

All, 

Seems very simple yet a little complex to me. My wife is a housewife and has her own Saving A/Cs. My questions Below:

1. Can she book regular FD with the Money I am giving her everyday/Month/Year?

2. Can I gift my money to my Wife and have it recorded in Plain paper with both of our signature and the money becomes her? is it possible?

3. I know if the interest earned less than 10,000, TDS is not applied. What if the interest earned for a financial year is more than 10,000. If she submits Form 15G, is that the whole interest is free?

4. If she opens sweeping FDs where the maturity amount again gets fixed for a specified time-period, is that still the TDS will be deducted if it is more than 10,000 INR.

5. What if her total income by means of interest earned is below 2L, is she responsible/accountable for filling Income tax. If yes, which forms are required. I believe, she will not have Form 12A/B from employer, is that only Form 15 is enough. 

6. Any other better option park some money for near future use….apart from MFs.

Thank you for patience in reading and resolving my queries. 

Regards

deb

8 replies on this article “Interest on FDs booked by Housewife”

  1. Dear Debo, if you are transferring your savings to wife’s name & investing from her name, the income is taxable in your name. That’s the taxation issue.

    Regarding the Tax free bonds, NO, NSCs are not tax free. REC is coming with it’s issue of Tax Free bonds. Please check the same. If it fits your requirements, invest.

    Thanks

    Ashal

  2. Debojyoti Das says:

    thank you dear Ashal. Thank you for providing prompt response to my query and helping. Hopefully many others will have same kind of queries like me and they will get a solutions by this.

    Just a clarification if I am doing this is legal and within Income tax laws. Kindly though some light if it is illegal. also in your previous post you did mentioned about Tax free Bonds. Is that you are referring to NSCs provided by Post office. Kindly let me know if there are others and we have available opportunities like this for a short term like 1-2 yrs which are tax-free as well.

    best regards
    deb

  3. Dear Debo, she can file Form 15g for FDs under her name.

    thanks

    Ashal

  4. Debojyoti Das says:

    dear Ashal,
    I agree to what you said and that is what we are doing. however, in item in question is should she file Form 15G, Yes or No if the interest earned for a year is more than 10K and less than 2L. I am confused in that. Also, as you see in my previous response, rather than opening the FD in my name i am opening in her name as ROI is more. therefore, should she file File 15G. Kindly confirm.
    Say Eg, from last 6 months, i saved some money in S/B and now i have 2L which i want an FD on her name (for more ROI); then yearly Intersest for. eg, is 20K, is that she has to provide 15G for exemption from TDS and should she file ITR at the end of year for the same. Thank you for answering.

  5. Dear Debo, let me interpret what you want to do. Please pay the mly household amount to your wife, let her save something from it & invest it in her name. This is a workable solution. 🙂

    thanks

    Ashal

  6. Debojyoti Das says:

    Thank you Arpit for providing your inputs. Points taken.
    dear Ashal,
    The only thing why i am putting the money in FD in her bank is because it is giving me 0.5% extra interest rates. As I said, the money is for extremely near future, therefore, not considering to invest in mutual funds or PPF. FMP returns are indicative based on funds performance, not guareented.
    I don’t know but if someone has no income, therefore, need not be necessary that that person should not have any money in hand/bank. I don’t agree to it. Also, gifting money to wife is like saving some money from house hold expense. Instead of doing a FD on my name, doing it on her name for 0.5% extra. Income source is one which is being partly divided between me and wife.
    Point is should she fill Form 15G or not if all the interest from all FDs are below 2L. As i undestand, it becomes a clubbed money, it does not make any difference whether 15G is filled or not on her name. Kindly clarify.

    thanks
    deb.

  7. Dear Debo, why do you want to play with fire? If she is a housewife, please do not invest in her name in instruments where income is taxable. Either invest in PPF or Eq. MFs as the income from these is tax free. Soon to be launched tax free bonds may also be an option.

    Thanks

    Ashal

  8. Arpit Goyal says:

    Hello Debojyoti,
    1.) Section 64 of IT Act prohibits any direct/indirect transfer of funds between an assessee & his spouse. Hence no gifts should be made to spouse. BUT if gift is made then this leads to clubbing of income of spouses.
    2.) FD made on your wife’s name, fill up form 15G which lets no deduction of TDS to be done on your wife’s FD interest income.
    3.) The total interest of that FY in your wife’s FD shall be added to your income & be taxable as per your tax slab. (clubbing of income Section 64 IT Act,1961) Hence filing an IT Return for your wife is not at all required.
    4.) You can definitely give your wife an Interest Free Loan.
    5.) Options to park money for near future use : FMP are available for different durations so you can select as per your requirement.

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