Tax savings: Give loan, not gift, to spouse to avoid income clubbing

Documentation of the loan agreement is crucial to avoid treatment as gift

Taxpayers under the old tax regime are keenly focused on saving taxes. What many don’t realise is that including their spouse and children in their tax planning can enable them to reduce their tax burden legally.

Give a loan 
 

A person can reduce their taxes by loaning money to their spouse. For example, if a husband loans money to his wife to open a nail spa, and she agrees to repay it with interest, the money she makes from the business doesn’t get clubbed with the husband’s income for tax purposes.
 

“On the other hand, if the husband gifts the