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measure to save tax : Everyone wants to save tax on their earnings and there are many ways for this. But one method that is most discussed is transferring money to wife's account to save tax. People keep looking for different ways to save tax and transferring money to wife's account is one of them. Is it true that if you transfer money to your wife's bank account, you can save income tax? Is it possible to save tax by transferring money to wife's account? Is this method legal? What can be its advantages and disadvantages? This is a question that comes to the mind of many people.
Based on a report by Financial Express, today we are going to tell you the answers to some important questions related to this. Let us know who will be responsible for paying capital gains tax in the cases mentioned below, the husband or the wife?
first question – Suppose a husband transfers his money to his wife's account. His wife is a housewife who invests the money she receives from her husband in mutual funds and stocks in her name or the husband invests this money from his wife's account in these properties in his wife's name. In such a situation, who will pay the capital gains tax on the sale of these properties in the future, the husband or the wife?
answer – Experts say that Section 64(1)(iv) of the Income Tax Act provides that if a person directly or indirectly transfers his property (which can be cash/money transfer) to his spouse, then the income from such property is clubbed with the income of that person (i.e., the one who transfers the money) and taxed on it. This is called the clubbing provision.
Therefore, if a husband transfers money to his wife's account, which the wife uses to buy mutual funds or invest in stocks in her name, the income by way of dividend or interest or capital gains on such stocks and mutual funds will be clubbed with the income of the husband (i.e. the transferor). Similarly, if a husband invests his money directly in the name of his wife, the clubbing provision under section 64 of the IT Act will apply to him as well. And therefore, any income arising from such property or capital gains arising on account of transfer of such property will be clubbed with the income of the husband.
second question – Suppose a husband buys a house in his wife’s name (money is transferred from the husband’s account to the wife’s account and payment is made from the wife’s account). In such a case, who will pay capital gains tax on the profit earned on selling such property in the future? And, if this property is rented out, who will pay tax on the rental income?
Answer: In this case, Section 27 of the Income Tax Act provides that if a person transfers house property to his or her spouse without any cost, then in such a case the person transferring the property will have to pay tax on the rental income or capital gains on that property.
Tax Saving Tips: What to do to save tax?
- If a person transfers property in the name of his would-be wife before marriage then it will not come under the provision of income clubbing.
- If you give money to your wife for expenses every month and she saves it, that too will not be added to your income.
- You can also save tax by taking health insurance for your family. Under Section 80D of Income Tax, you can save up to Rs 25,000 on health insurance premium.
- You can also open a joint account for investment, just keep in mind that the primary holder should be the one whose tax liability is lower, because the primary holder is liable to pay tax on the interest received in the joint account.