Savings in Spouse name

POSTED BY vadivel mr ON May 3, 2013 5:41 pm COMMENTS (7)

We have a joint account and I am investing my savings in my spouse name in the form of FD. She is a home maker and has no other income. Will there be any tax implication for her? Any best practices on this 🙂 Please advice.

P.S: I am not asking for suggestions to do tax evasion. I fall under 30% tax bracket so am trying to understand legal ways by which i can do my monthly savings and enjoy max returns.

7 replies on this article “Savings in Spouse name”

  1. Avanish Gupta says:

    Yes, agree.
    Thanks.

  2. Dear Avnish, please read my reply again. The basic 1000 Rs. interest ‘ll always be clubbed with the husband’s income where as any interest on 1000 Rs. ‘ll be wife’s income. No matter it’s for 1st year or for subsequent years.

    Thanks

    Ashal

  3. Dear Siva, the income generated from the interest (1000 Rs.) is taxable under wife’s name for 2nd year’s invest but the basic interest of 1000 Rs. again in 2nd year ‘ll be taxable under husband’s name. 🙂

    Thanks

    Ashal

    1. Avanish Gupta says:

      Hello Ashal, under IT Act, clubbing happens only at the first level of income, from the next year if the entire money reinvested and earn some income, it will be taxable in the hand of spouse only and taxed as per the applicable slabs.

  4. Dear FFC,

    I had read somewhere that, though, due to clubbing provisions, Income raised from gift given to spouse is taxable, Income raised from the Income from gift is taxable.
    If there is an FD of 10000/- in the name of my wife and interest I earned is 1000, then 1000 will be added to my income. But that 11000 is free to invest in the name of wife again, and interest on 11000 is not taxable. This way we can reduce our tax liability.

    Please let me know if I am wrong.

    Thank You
    Siva Prasad

  5. vadivel mr says:

    Thanks for your time and inputs FFC.

  6. You will have to pay tax on entire interest earned on the FDs in her name.
    Some people give stupids ideas like gifting money to wife. You still need to pay tax!

    only way working spouse can avoid tax by transferring money to homemaker spouse is to give her a loan with nominal interest rate! This is not worth the trouble.

    Want low tax outgo? Use debt funds instead of FDs.

    Read
    http://freefincal.wordpress.com/fd-vs-debt-fund-returns-comparator/

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