I have query on saving income tax. I am an individual falling in 30% tax bracket.
I invest 5 lakhs in a equity oriented mutual fund in my wife's name who is a housewife(who has no income). After exactly 1 year, she takes out only the profit from the mutual fund (say 50k is the profit assuming a 10% growth). She invests this tax free profit of 50k in a fixed deposit in her name to earn a stable income. She continues to do this every year(assuming an average 10% growth every year) to increase the fixed deposit amount.
Will the interest earned from this fixed deposit be clubbed with my income for taxation ?
My understanding is the profit belongs to my wife and she can invest it in fixed deposit to earn stable income and she doesn't have to pay any tax as long as it falls within the slabs.
Could anyone advice me if this tax saving plan sounds valid.
Thanks and Regards,
Kamal
CAclubindia
