Income tax saving tips: The method of saving tax by depositing money in wife’s account comes under the ‘clubbing provision’. If you make any investment in your wife’s name or deposit money in her account, then it can have some benefits.
Income Tax Save: There are many ways to save tax, but one method that is often discussed is to deposit money in the wife’s account. This can be a great option, the trick is great, but it is very important to know its complete rule. Let us know the rules behind this trick and its benefits.
How does this method work?
The method of saving tax by depositing money in wife’s account comes under ‘clubbing provision’. If you make any investment in your wife’s name or deposit money in her account, then it can have some benefits.
What do the clubbing provision rules say?
Sections 60 to 64 of the Income Tax Act If you deposit money in your wife’s account and it generates any income (such as interest, rent, dividend), that income is added to your total income and taxed. This is called the ‘clubbing provision’.
Gift Tax
If you gift any amount to your wife, there is no gift tax on it. However, clubbing provision is applicable on the income generated from it.
Ways to save tax through investment
If your wife has low or no income, you can invest in her name such as fixed deposits, mutual funds, or PPF. This will reduce the tax on the income.
House Rent Allowance (HRA)
If you live in a rented house and the house is in your wife’s name, you can pay her rent and claim HRA. This will reduce your taxable income.
Transfer to savings account
By depositing money in your wife’s savings account, you can save tax on the interest earned on it. Income tax exemption of up to ₹ 10,000 is available on the interest on savings account.
What should be done?
- Invest in the name of the wife so that the income received is taxed less.
- Use the clubbing provision properly.
- Try to save tax through HRA.
What should not be done?
- Do not give wrong information from the tax point of view.
- Do not ignore the clubbing provisions.
- Do not take any financial decision without understanding it.
How can tax be saved?
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.
5. You can also open a joint account for investment. The primary holder should be the one whose tax liability is low because in a joint account, the tax liability on the interest is borne by the primary holder.
