Where to invest 3 lacs?

POSTED BY Ravi ON April 28, 2013 1:57 pm COMMENTS (8)

I have 3 lakhs with me. Can I transfer this to my wife’s account (She is in 10% bracket and I am in 30%) and invest it from there. I am planning for a long term say around 4-5 years.

I am open to investing in FDs, MFs (debt preferably being risk averse). Which would be the best option?

8 replies on this article “Where to invest 3 lacs?”

  1. Ravi says:

    Thanks FFC for your response. I read in one of Manish’s articles here that one can lend money to one’s spouse with simple paperwork. Then spouse can invest it. Since my wife is in 10% bracket, I was thinking of saving some tax there.

    Isn’t this possible?

    1. No!

      Read

      https://www.jagoinvestor.com/2009/09/what-are-income-clubbing-provisions-and.html

      incl comments. Ashal has mentioned ways to do this (not with FDs)

      One way to do this is to invest in Arbitage mutual funds. These invest in arbitage opportunities with near zero risk. Returns will be about 6%. Good thing is if held for over an year there is no tax whoever invests. Note: the historical risk is similar to liquid funds however
      there are extraordinary circumstances (terrorist attack etc) which can be risky.

      So risk wise it is minimum but non-zero like FDs

      My take: Keep it simple. Use FDs and pay tax.

      1. Ashish says:

        Dear FFC,

        In continuation to above question,

        1. The link you have shared, its 4th point says, one can lend money to spouse by simple paper work and then the income from that loan would be considered as spouse’s income and not one’s – Whereas to above response from Dear Ravi you said NO!. Please clarify.

        Also, myself and my wife both are working, (I am in 30% and wife in 20%). We both invest in FD, MFs or direct stocks but generally keep on moving money from each other’s account considering that gifting money between husband and wife does not attract any tax implication on this gifted amount. Need to know, if my understanding is correct.

        e.g. I transferred 25000 to my wife’s account and invest in MF in her month in a certain month. May be after 6 months she transfer 35000 to my account and I invest in direct stock in my name. Does any kind of tax implications arise here except for whatever incoem we generate is taxed individually to us.

        Looking forward to response.

        Ashish

        1. My understanding is clubbing rules are quite clear about this. interest earned this way is taxable in the name of the lender.

          Many do what you. It is a mess. Best to avoid it in future except when:

          If the instrument has tax free income like equity held over an year then there is no problem at all.

        2. There is one way out in future. Give her a loan but with a reasonable rate of interest. This way the gains she makes from the loan will hers to worry about wrt tax.

          However there must be evidence for everything:

          Loan paperwork, payment of emi or some such thing to you. In other words it is a headache.

          Everything is computerized these days. A few simple clicks is enough for the taxman to come knocking.

          1. Ashish says:

            Dear FFC,

            Thanks fro clarifications. Shall keep this in mind for future.

            Ashish

  2. Sorry I meant those in the 30% slab

  3. 1. investing in wifes name still means you need to pay tax!

    2. For a 4-5 year duration an income fund with average maturity of 4 years
    eg. Templeton India Income
    or a short term debt fund with avg maturity of 1-2 years.

    Maturity here refers to not that of instrument but that of the underlying debt securities.

    Choose one with low risk and consistent performance

    Debt funds score over FDs for those in 20% slab wrt taxes.

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