A homemaker's work is never finished. From sending kids to school to shopping and managing the household, her day is fully packed. Now, add one more task to this long list—investing to earn tax-free money.
This is not as simple as it appears. If you gift money to your wife, there is no tax implication. However, if this money is invested, the taxman will club the earning with your income for the year.
The clubbing provision under Section 60 is meant to check tax evasion.
If you are taxed on the income, is there any point in investing in your wife's name? Yes, there is. The clubbing happens only at the first level of income.
If this money is reinvested and earns an income, it will be treated as your wife's, not yours. "The income from the reinvested income does not attract the clubbing provision," points out Sudhir Kaushik, chartered accountant and co-founder of tax filing portal Taxspanner.com.
Source : articles.economictimes.indiatimes.com
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