Dear Sir,
I would like to transfer 5 Lakhs to my wife as a gift. If my wife invest this amount as F.D. The earned interest is clubbed to my income. The principle amount belongs to whom. I read some where that the earned interest will be the wife property in the next year onwards But there is no clarity about the principle amount. If principle amount and earned interest clubbing together again my wife made F.D in the next year. What will be the tax impact. Is it on me or my wife.
1 Answers
Hi,
The principal amount belongs to your spouse as it is a gifted one. There wont be any tax implication on the gifted amount however your understanding on the clubbing of income is correct.
Let’s go through an example to see how it works. Suppose you gift Rs 5 lakh to your spouse and she puts the money into fixed deposit at 10% interest per annum, which works out to be Rs 50,000 a year this is how it would work:
Example : If the recipient is your wife then the income earned i.e. 50,000 will be added to your income for taxation, and you would pay taxes on that based on your tax slab. However if she reinvests this Rs 50,000 and earn Rs 5,000 (10% of 50,000) as interest, then the income on reinvestment, which in this case amounts to Rs 5,000 will be considered as her own income.
Kindly read:
http://www.relakhs.com/gift-income-tax-rules-detailed-guide/
http://www.relakhs.com/gifts-income-tax-implications/
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