If a senior citizen makes FD in identify of his son, who pays tax on curiosity?

I’m a senior citizen. If I make a hard and fast deposit within the identify of my grownup son, who will probably be liable to pay tax on the curiosity from the FD?

The transaction can both be handled as present or a mortgage. In case you give this cash as present to him, there won’t be any tax implications for you as present acquired from specified relations together with guardian are tax free within the palms of the recipient. The clubbing provisions can even not apply as your son is grownup. 

Alternatively, you’ll be able to advance this cash as mortgage to your son which then might be invested by him in FD and which shall be taxable in his hand. The mortgage might be curiosity free or curiosity bearing mortgage. Please observe that in case you give an curiosity free mortgage and are already paying any curiosity on the cash borrowed, advancing of curiosity free mortgage won’t work because the assessing workplace could disallow your declare for proportionate curiosity paid relatable to the curiosity free mortgage. 

Please observe that simply by gifting the cash to your son, which is exempt in his hand, you’ll lose your proper over your cash.

In case you don’t intend to deal with this transaction as present or a mortgage, the revenue tax officer could membership the curiosity revenue making use of the provisions of Section 60 which covers the instances of switch of revenue with out switch of the underlying asset. 

Balwant Jain is a tax and funding knowledgeable and might be reached on jainabalwant@ gmail.com and @jainbalwant on Twitter

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