Tax implications on investment done using money returned by husband

POSTED BY monGenie ON February 23, 2013 1:25 am COMMENTS (7)

Hi there!

I am a homemaker living with my husband in USA.. I used to work in India.. so I had money saved in my Indian local bank as a FD.. sometime back my father-in-law booked a house and I broke my FD and give it to my FIL through my husband’s bank account. i.e. I transfered to my husband and he transfered to my FIL’s account. Now, after a while, my  husband wants to return that money back to me.. so does it become taxable if I invest that lumpsum money in India?

7 replies on this article “Tax implications on investment done using money returned by husband”

  1. monGenie says:

    Yes, Ashal.. I understand in the sample scenario above.. income generated will be added to my husband’s income and he will be taxed

  2. Dear Mongenie, let me clarify you what dear Manish is telling. In the given situation, you can handle it. Sample a different case. Your husband give/transfer some money to you & you invest it in bank FD. Now do tell me in whose name the Fd interest ‘ll become taxable?

    As long as there is no income generation from the transferred amount, it’s OK but the moment, there is any income generation, the problem is there.

    Thanks

    Ashal

  3. monGenie says:

    Dear Manish,
    Thanks for your reply.

    I understand that in this case we can easily prove, if need be, that I gave some amount as a loan to my husband and that there should be no tax.

    But I don’t understand what do you mean by “Ideally these kind of bank transfers should not be done without putting a little thought .” Since such transfers are required in real life.. you can transfer without upper limit to specified relatives (in eyes of law).

    So, could you please elaborate?

  4. Actually there should be no tax . All you need to do is show that you had given the money as loan to your husband . There is a two way transaction and it should not be tough to show the proof for it . Ideally these kind of bank transfers should not be done without putting a little thought .

    Manish

  5. monGenie says:

    Thank you, both of you!

  6. Dear Mongenie, let me understand your query with an example. You broke a FD of 5L Rs. & transfer the amount to your Husband’s account. Now your husband is returning the same 5L Rs. to you. Am I correctly understanding till this point?

    If your answer is yes, the money received by you is your own capital received back from your husband so no tax on it. Now if you are going to invest this capital of 5L Rs. some where, the tax ‘ll be there on the income generated from this 5L Rs. if that income comes under taxable income definition.

    For example – Bank FD interest is taxable.
    For example – Eq. MF investments are tax free after 1Y holding.

    Thanks

    Ashal

  7. Yes. You gave some money to your husband. He gives it back to you. You invest your money. So you pay tax on what you earn depending on the amt and existing tax laws.

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