Income Tax: Do you transfer money to your wife’s account every month? Or have you given money to your wife for her business or any other work. Does this transaction come under the purview of income tax. Can you save tax here. When and under what circumstances can you save money by transferring money to your wife’s account?
First know about Clubbing of Income
Sections 60 to 64 of the Income Tax Act have the provision of “clubbing of income”. If tax is deducted in your name on the income received by someone else.then it is called clubbing of income.
This rule applies to individual taxpayers. In simple words. if under any circumstances you give money to your wife and there is income from interest or dividend on that money, then that income will be added to your income.
When will you be taxed?
Suppose, you gave Rs 2 lakh to your wife and she invested that money in fixed deposit or invested it in mutual fund or stock. in such a case the income earned from these investment mediums will come in your name and you will have to pay tax on it.
Similarly, if you have given any of your houses on rent. but take the rent in your wife’s account.then also this rental income will be added in your name. because here the Transfer of Income without Transfer of Asset rule of section 60 will be applicable.
That is, you are taking rent in the name of your wife for such a rented house. which you have not done in the name of your wife, that is, that property is yours.
How can you save tax?
1. Those who are about to get married, if they make any property or gift in the name of their future wife before marriage, then it will not come under the provision of clubbing of income.
2. If you give money to your wife for expenses and she saves it, then that too will not be added to your income.
3. You can also save tax through health insurance. Under section 80D, you can save up to Rs 25,000 on health insurance premium in the name of the family.
4. You can also save tax by giving money as a loan to your wife instead of gifting it. You can give her a loan at a low interest rate. You should just keep everything documented from giving the loan to taking the interest. This will ensure that the income of both of you is not clubbed and your tax liability will be reduced.