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Is Money Gifted to Wife is Taxable?

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No gift tax is applicable where gifts are received from husband.

There is no limit on this amount.

If she has invested that amount in investment plans and earned interest income from that, then this earned income will be clubbed in Husband’s income.

However if she further invests this income in another saving plan, the income generated out of that is not clubbed in Husband’s income. It will be taxable to wife.

 

For Example-

Mr. Ram transferred Rs. 2,00,000 to his wife, who is not working. She has invested that amount in FD’s and earns interest income of Rs. 15,000. What is the tax liability

Answer:

Rs 2,00,00 given to his wife is tax free but interest income of Rs. 15,000 earned by his wife, is taxable in the hands of Mr. Ram only.

 

Clubbing of income is not applicable if she further invests Rs. 15,000 and earns any income. That amount will be taxable in the hands of his wife and not in the hands of Mr. Ram.

If a wife receives a house as a gift from her husband, the gift will not be taxable in her hands. However, if she lets out the house and earns rental income, such income will be clubbed with the income of her husband. A similar treatment will apply to any capital gains she earns from the sale of the house.

 

The following situations come under the rules of clubbing of income: -

Transfer of an assets (other than house property) to his wife –

If assets transferred directly or indirectly to his wife without adequate consideration (the transfer must not be in connection with an agreement of divorce settlement or with adequate consideration) then the income generated from this asset will be clubbed in Husband’s  income

Or

If you have transferred an assets to a person or AOP directly or indirectly, without adequate consideration, for the benefits of his wife, then the income generated from this assets will be clubbed in Husband’s income.

If Mr. Ram has transferred Rs.35 lakh to his wife, instead of the house property. In return, his wife purchased a flat. The ownership, in this case, is with his wife. However, any rental income or capital gains from this property are the income of Mr. Ram (while the ownership is with his wife).

 

Transferred a house property is covered under section 27 (1) of Income Tax Act as below:-

If Mr. Ram transfers his house property to his wife without adequate consideration, then in such a case, even the property belongs to his wife, the deemed owner of property is Mr. Ram. In future, if his wife sells the property, then the capital gain arises from sale of such property is the income of Mr. Ram and not of his wife.

However, not cover cases where the property is transferred to a spouse in connection with an agreement to live apart.




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