10.  The Husband can Give a Loan to his wife, Not a Gift

We have explained in an earlier tip that a married woman should not take gifts from three prohibited persons, namely, her husband, her father-in-law and her mother-in-law. Earlier, till FY 1985-86, no gift-tax was payable by the husband on the gifts up to ` 50,000 made in his lifetime to his wife. Now, while gift-tax has been abolished but the income from any gifts made to his wife is to be included in the income of the husband under the provisions of Section 64(1) of the Income Tax Act. Hence, the very purpose of making the gift is defeated and complications might start. Therefore, generally speaking, a husband should not make any gift to his wife. On the other hand, the husband can give a loan to his wife, who may, in turn, invest the loan amount either in the purchase or construction of a house-property or in the acquisition of shares, or in other investments. The only precaution to be taken in such a case is that the interest charged by the husband should be a reasonable one.

Supposing a salaried employee receives a loan from his Provident Fund money at the rate of, say, 8% per annum. He may give that money as loan to his wife and charge a rate of interest, which should not be lower than 8%. Where the husband is also the Karta of a Hindu Undivided Family, he could make advances or loans to his wife that she could utilise for earning an independent income of her own. Besides, a married woman may take a loan not only from her husband but from anybody at all. However, the same condition regarding the payment of a reasonable interest mmt be ensured. As to what would be a reasonable rate of interest, depends upon the facts and circumstances of a case.


Let us take an example to explain clearly the concept of married woman taking a loan from her husband. Let us suppose, she has a balance of
`6,10,000 in her bank aucount. She is interested in buying a flat, the cost of which is? ` 15 lakh. For meeting the shortfall, she takes a loan from her husband of ` 9 lakh. Now, she must pay to her husband a reasonable rate of interest. In the present scenario a reasonable rate of interest could he 6% to 8% p.a. The purpose of buying the property is to give it on monthly rent.

Now, if the husband were not to charge any interest on the loan, then the rental income so received by the wife would be clubbed with the husband’s income because the granting of an interest—free loan by the husband to his wife would be treated as an “indirect transfer” to the wife. It is, therefore. recommended that whenever she requires any money for investment or business purposes, a married woman should take it as a loan, and not gift, from her husband, and the loan should always bear a reasonable rate of interest.

 
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