Income tax notice rules: According to the Indian Income Tax Act, special rules apply to transactions made between husband and wife. The husband can give money to his wife in cash or other form, but it is mandatory to follow the Income Tax rules and the provisions of Section 269SS and 269T.
Income tax notice rules: Cash transactions between husband and wife are common, but if it is done without thinking, then a notice can come from the Income Tax Department. There is no direct ban on cash transactions between husband and wife under the Income Tax Act, but there are some rules and circumstances that are important to understand. Income tax rules on cash transactions Under the Income Tax Act in India, there is no direct tax liability on cash transactions between husband and wife. If you do not understand these rules, then you may have to face financial problems.
According to tax experts, if the husband gives money to his wife as household expenses or gift, then this amount will be considered as the husband’s income and the wife will not have any tax responsibility on it. According to the Indian Income Tax Act, special rules apply to transactions made between husband and wife. The husband can give money to his wife in cash or other form, but it is mandatory to follow the income tax rules and the provisions of section 269SS and 269T.
1. Tax rules on giving cash to husband and wife
Household expenses or gift
If the husband gives cash to his wife, whether it is for household expenses or as a gift, then no income tax notice comes on it. This amount is considered as the income of the husband and no tax liability is imposed on the wife.
On giving cash for investment repeatedly
If the wife invests this money repeatedly and earns income from it, then the wife will have to pay tax on this income. In this situation, the wife will have to show this income in the Income Tax Return (ITR). It can be added to the husband’s income under “clubbing of income”, which can increase the tax liability.
2. Income tax rules on cash transactions
Under the provisions of Section 269SS and 269T, some limits have been set on cash transactions between husband and wife:
Section 269SS: Cash of more than ₹ 20,000 cannot be given in lump sum. If the transaction is more than ₹ 20,000, then it is mandatory to do it through banking medium (such as cheque, NEFT, RTGS).
Section 269T: If cash of more than ₹20,000 needs to be returned (borrowed from someone), it can be done only through banking channels.
Special exemption: Due to close relationship between husband and wife, there is no penalty under these sections. However, it is important to follow these rules to maintain transparency.
3. Limit on giving cash to wife
There is no limit for household expenses.
The husband can give any amount to his wife for household expenses. This amount is not taxable, and it is considered a part of the husband’s income.
For investment
If the wife uses the money given to her for any investment, such as fixed deposit, stock market, or to buy property, then tax will have to be paid on the income earned on it. Suppose the money given to the wife generates an annual income of ₹ 1,00,000, then it will be added to the husband’s income and tax will be levied.
4. Precautions in cash transactions
Rental income: If the money given to the wife is used to buy a rental property and rent is received from it, then this rent will be considered the wife’s income and tax will have to be paid on it.
Gift tax rules: The amount given as a gift by the husband to the wife is not taxable, because the husband and wife come under the category of close relatives.
5. Ways to avoid tax notice
- Do not make cash transactions of more than ₹ 20,000.
- Use banking medium (cheque or NEFT/RTGS).
- Enter the information of wife’s investment amount correctly in the tax return.
- If the wife has bought any property (property, FD), then ensure payment of tax on her income.
6. Possibility of notice
If the Income Tax Department finds out that the husband has used the amount given to the wife to save tax or the income earned from this money has not been disclosed, then the department can issue a notice.
What are Income Tax Sections 269SS and 269T?
Sections 269SS and 269T are provisions under the Indian Income Tax Act, which have been made to regulate cash transactions and curb black money. The purpose of these sections is to ensure that cash transactions are transparent and tax evasion can be avoided. Under Section 269SS, any person or entity is prohibited from accepting, as loan, deposit, or advance payment, in cash, an amount of ₹20,000 or more.
What is the penalty provision?
If someone transacts more than ₹20,000 in cash and is not in a husband-wife relationship, then the tax department can charge the same amount as a penalty. If a person violates this provision, he will be fined under section 271D.
Who gets exemption?
Transactions between close relatives: No penalty is imposed on cash transactions between husband-wife, parents and children, siblings, etc.
Gifts and essential expenses: These provisions do not apply to the amount given for gifts, household expenses, or other valid reasons.
Agricultural income: These sections have no effect on income and transactions related to agriculture.
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