North India Statesman
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This is common in all of us in our homes: Sometimes husbands give some money to the wife, sometimes the wife helps the husband with her earnings, or rather, give each other a gift. We all think of ‘house money in the house’, but do you know that the Income Tax Department also keeps an eye on this ‘house money’? Yes, some cash transactions done between husband and wife can also give you income tax notice, if you do not take care of the rules!
This is not just ‘relationship’, in the eyes of Income Tax Department, there is also ‘transaction’
Actually, there are some special provisions in the Income Tax Act which is necessary for every family where the husband and wife give a large amount to each other. The main issue here is not for the gift or transfer of money, but the income from that money.
Which rule is talking?
This whole matter Sections 64 (1) (iv) and 64 (1) of Income Tax Act Is associated with ‘Clubing of Income’ Is called the rule of. This easy means that:
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When husband gives money to wife: If the husband gives a cash gift or money to his wife, and the wife invests that money somewhere (eg FD, stock market or any business) and Earn incomeSo this income earned by the wife is added to ‘husband’s income’ (club is done). In easy terms, the husband has to pay tax on that earnings.
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Example: If the husband gave Rs 5 lakh to the wife, and the wife imposed 5 lakhs in FD which received an interest of Rs 30,000. So it will be taxed not by assuming the income of the husband, not 30,000 rupees.
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When wife gives money to husband: Similarly, if the wife gives money or gift to her husband, and with that money the husband earns any income, then the income is added to the wife’s income and the wife has to pay tax on it.
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Whom to protect? The purpose of this rule is to avoid benami or illegal transactions and stop tax evasion. This ensures that people do not divide their income among family members to pay less tax.
What to do so that the notice does not come?
Do not panic, it does not mean that husband and wife do not give money to each other! There are just some things that are very important to take care of:
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Declare income: If the law of clubbing applies to you (ie the husband or wife earns income from gifted money), then it should be declared properly in the income tax return of the income (spouse). This is the biggest security shield.
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Banking channel uses: Avoid large cash transactions. If possible, use bank transfer or check. This leads to transparency and you have a strong record of transactions.
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reasonable reason: If the money is given for a business or a particular requirement, it can be beneficial to keep its record.
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Advice from Tax Consultant: If you have to do a big transaction or your financial condition is a bit complex, it is always better to consult a qualified tax consultant. They will help you choose the right ITR form and follow the rules.
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Proof of gift: It is always good for big gifts (such as buying a house), making ‘gift deed’, even if it is among relatives.
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Earning from personal skills: Keep in mind, if the husband/wife has income not due to the money received, but due to his personal skills or knowledge, then the law of clubbing does not apply to it.
So next time you do financial transactions at home, keep these rules in mind. A small precaution can protect you from big headache and you can relax and file your ITR. This is the easiest way to protect your earnings and avoid legal mess!
