I have transfered 10lakhs to my wife she puts it in short term FD day 10 days and then that interest is clubbed yo my income say 1000rs…So I shall show 1000rs in my itr then she reinvests the total 10L and 1000rs again in FD for long term thereafter the interest on whole 10 lakhs 1000 rs it should be filed with her itr rite? Can u confirm my statement is right r not
But since we are putting the whole amount as FD how is it possible to file seperately the income…Also if the wife invests the whole amount 10 lakhs and 1000rs in FD of joint account of both husband and wife…will the tax be borne by the primary account holder of the joint account.
If the same was invested in mutual fund instead of FD and wife sells share with profit 1000rs and reinvests the whole amount 10lakhs and 1000rs will it be taxed with wife’s itr
@CA_Anand_Thakor pls reply
- Since you are the primary holders of Joint account, entire interest amount taxable in your hands. (You have not transfer any fund to wife’s account separately which mentioned by you in your first question)
- Mutual Funds: On amount 10 lakh any gain or loss will clubbed in your hands.
In future if you booked profit and capital increased to 11 lakh, then gain on 10 Lakh club in husband hand and 1 Lakh include in wife hand.
@CA_Anand_Thakor What if wife is the primary account holder of joint account…will it be taxable by her
No, Mere primary account holder does not constitute ownership and source of fund.
@CA_Anand_Thakor interest free loan or subsidised loan say at 3% to take care of expenses can be given rite…then clubbing will not apply…
- Lower interest rate loan allowed with proper documentation.
- Interest free loan MAY create some litigation as new development in case law.
@CA_Anand_Thakor
Say I give 50 lakh loan to wife for 30 yrs 2% simple interest. Since repayment amount is less than 20000/- per month it can be cash repayment no need bank trfr Rite…
Or should there b proof via bank transfer for both principle and interest repayment or just document is enough when asked
Also where to show 50 lakh interest in husbands itr and 50 lakh amount in wife’s itr
1. Can Repayment Be Made in Cash (Below ₹20,000/Month)?
- Not Allowed, 100% minimum penalty
- Hence, repayment (both principal & interest) should ideally be through bank transfers (NEFT/RTGS/UPI/Cheque) to maintain legal proof.
Best Practice:
Keep proper loan documentation (Loan Agreement with terms).
Ensure all repayments happen via bank transfer for clear proof.
2. Taxation Treatment for Loan & Interest
Husband’s ITR (Lender)
- ₹50 lakh loan given → Not shown as income (just a loan asset in books).
- 2% Interest received → Show under “Income from Other Sources” in ITR.
- If wife pays ₹1,00,000 annual interest (₹50L @ 2%), this should be reported in the husband’s ITR.
Wife’s ITR (Borrower)
- ₹50 lakh received → Not taxable (as it’s a loan, not income).
- 2% interest paid → Not deductible unless used for income-generating activity.
- Loan liability can be disclosed under Schedule AL (Assets & Liabilities) if applicable.
3. Where to Show ₹50 Lakh Loan in ITR?
Husband (Lender) – ITR Sections
| Income Type | ITR Section |
|---|---|
| Loan Given ₹50L (Asset) | Not required to report in ITR (only in books if maintaining) |
| Interest Income (₹1L per year @2%) | Income from Other Sources |
Wife (Borrower) – ITR Sections
| Loan Type | ITR Section |
|---|---|
| Loan Received ₹50L | Not shown as taxable income (Optional: Can be disclosed under Schedule AL) |
| Interest Paid (₹1L/year) | Not deductible unless used for business/investment |
Note: You must have source of fund ₹50 lakh, * If the source of ₹50 lakh is not explained, the IT department can treat it as unexplained income.
Penalty: 60% tax + 25% surcharge + 4% cess (Total 78% tax liability. refer section 68.
Disclaimer:
“This explanation addresses only the basic principles, it is essential to consult with your tax expert for personalized advice, as numerous other variables may apply.”
I have nsc maturing and have been paying tax for last 5 years on this nsc…so this is the source of income…I can show in the loan arrangement…
Principal repayment any proof needed or only for interest bank transfer is needed
Wife can trfr to joint account is that proof enough
Also if wife invests 50lakh in FD she can file in her itr1 rite?
Also the loan documents need not be shown…we should keep it ready only when asked rite?
Yes,
You MUST have documents ready now, whether ask or not. Follow strictly.
Principal and interest repayment to joint account possible
I am asking if loan documents need to be uploaded or not…just keep in hand only rite
- Not allowed.
- No need to upload
I am asking both husband and wife has joint account for expenses…if wife and husband transfers salary to the joint account for household expenses including loan and other expenses and at a fixed date every month from there to husbands account…is that possible
There are no restrictions on transferring funds from a salary account to a jointly held household account. However, if the intention behind such transfers is to reduce tax liability or evade taxes, it is not permissible under tax laws.
@CA_Anand_Thakor
I am asking if transfer from salary account to joint account is proof enough for loan interest payment
Or is transfer to husbands single account is needed
Also principle repayment also by bank transfer needed or cash?
@CA_Anand_Thakor can u reply
Hello @Dew
Transferring funds to a joint account is allowed, but for better tracking and clear proof of loan interest payments, it is recommended to transfer the payment directly to the beneficiary’s account. Also, principal repayment should be done via bank transfer to maintain a proper record.