Income Tax Saving Tips: Are you also thinking of saving tax by transferring money to your wife’s account? Know whether this method is legal and what are its advantages and disadvantages.
Tax-Saving Tip: Everyone wants to save tax on their earnings and there are many ways for this. But one method that is much discussed is to transfer money to the wife’s account to save tax. People keep looking for different ways to save tax and transferring money to the wife’s account is one of them. Is it really true that if you transfer money to your wife’s bank account, you can save income tax? Is it possible to save tax by transferring money to the wife’s account? Is this method legal? What can be the advantages and disadvantages of this? This is a question that comes to the mind of many people.
Based on a report by Financial Express, today we are going to tell you the answer to some important questions related to this. Let us know who will be responsible for paying capital gains tax in the cases mentioned below, husband or wife?
First question – Suppose a husband transfers his money to his wife’s account. His wife is a housewife who invests the money received from her husband in mutual funds and stocks in her name, or the husband invests this money from his wife’s account in these assets in his wife’s name. In such a situation, who will pay the Capital Gains Tax on the sale of these assets in the future, the husband or the wife?
Answer – Experts say that Section 64(1)(iv) of the Income Tax Act provides that if a person directly or indirectly transfers his property (which can be cash/money transfer) to his spouse, then the income from such property is clubbed with the income of that person (ie, the one who transfers the money) and is taxed. This is called Clubbing Provisions.
So, if a husband transfers money to his wife’s account, which the wife uses to buy mutual funds or invest in stocks in her name, then the income in the form of dividend or interest or capital gain on such stocks and mutual funds will be clubbed with the income of the husband (ie the transferor). Similarly, if a husband invests his money directly in the name of his wife, then the clubbing provision under Section 64 of the IT Act will also apply to him. And therefore, any income arising from such asset or capital gain arising on account of transfer of such asset will be clubbed with the income of the husband.
Second question – Suppose a husband buys a house in the name of his wife (money is transferred from husband’s account to wife’s account and payment is made from wife’s account). In such a case, who will pay Capital Gains Tax on the profit earned on selling such property in future? And, if this property is given on rent, then who will pay tax on the rental income?
Answer – In this case, Section 27 of the IT Act provides that if a person transfers house property to his spouse without taking any price from him, then in such a case, the rental income or capital gain on that property will have to be taxed by the person transferring the property.
Tax-Saving Tips: What to do to save tax
- If someone transfers property in the name of his would-be wife before marriage, then it will not come under the provision of clubbing of income.
- If you give money to your wife every month for expenses and she saves it, then that too will not be added to your income.
- You can also save tax by taking health insurance for your family. Under Section 80D of Income Tax, you can save up to Rs 25,000 on health insurance premium.
- You can also open a joint account for investment, just keep in mind that the primary holder should be the one whose tax liability is less, because the liability to pay tax on the interest received in the joint account is of the primary holder.
