Tax liability on cash gift
This query is : Resolved
17 July 2014
If husband gives cash gift by cheque to his wife on gift deed, the interest earned by wife on it will be treated as income of wife or income of husband for income tax calculation.
Ranjan Kumar Malhotra.
17 July 2014
it will be treated as income of husband..............
17 July 2014
Firstly say what interest u r asking about? Coz one cant' earn interest on cash. if the amount is invested somewhere or the husband has forwarded the money to his wife as a loan then interest element is applicable.
18 July 2014
It is the income earned on that gift amt is to be clubbed. see what income is earned on that gift amt invested.
26 July 2025
This is a classic question about **gifting between spouses** and how **clubbing of income** works under Indian tax laws.
Let’s clarify this simply and accurately:
---
## 🔍 **Scenario**
* Husband gives **cash gift by cheque** to wife, backed by a **gift deed**.
* Wife **invests** this money somewhere (e.g. FD, mutual funds, property, etc.).
* **Interest/income is earned** from this investment.
### ❓Whose income will be taxed — Husband's or Wife’s?
---
## ✅ **Answer (As per Indian Income Tax Act)**
Under **Section 64(1)(iv)** of the Income Tax Act:
> If an individual **transfers an asset to their spouse** without adequate consideration (i.e. as a gift), and **any income arises** from that asset, then that **income is clubbed** with the **transferor’s income**.
---
### 🔹 So, in your case:
| What Happens | Who Pays Tax |
| -------------------------------------------------------------------------- | ------------------------------------------- |
| Gift of money by husband | ❌ No tax (gift is exempt between spouses) |
| Income earned by wife (e.g. interest from FD, rental, dividends) | ✅ Taxable in **husband’s hands** |
| If wife **re-invests** income earned from original gift (secondary income) | ✅ Taxable in **wife’s hands** (not clubbed) |
---
## 💡 Example:
* Husband gifts ₹5 lakhs to wife.
* Wife puts it in a **fixed deposit** earning ₹30,000 interest annually.
* This ₹30,000 is **clubbed with husband's income** and he pays tax on it.
* If the wife later invests that ₹30,000 and earns another ₹2,000 interest:
* That ₹2,000 **is not clubbed**, and is taxable in **wife's hands**.
This second-layer income is called "**accretion on accretion**" and is **not clubbed**.
---
## ✅ Summary
| Aspect | Tax Treatment |
| ------------------------------- | --------------------------------------------------- |
| Gift from husband to wife | ✅ Exempt from tax (gift between relatives) |
| Income earned from that gift | ❌ Taxable in **husband's** hands (clubbing applies) |
| Reinvestment income (secondary) | ✅ Taxable in **wife’s** hands |
---
Let me know if you'd like a **sample gift deed format**, or help calculating the **tax implication** of a specific investment made using gifted funds.
Let’s clarify this simply and accurately:
---
## 🔍 **Scenario**
* Husband gives **cash gift by cheque** to wife, backed by a **gift deed**.
* Wife **invests** this money somewhere (e.g. FD, mutual funds, property, etc.).
* **Interest/income is earned** from this investment.
### ❓Whose income will be taxed — Husband's or Wife’s?
---
## ✅ **Answer (As per Indian Income Tax Act)**
Under **Section 64(1)(iv)** of the Income Tax Act:
> If an individual **transfers an asset to their spouse** without adequate consideration (i.e. as a gift), and **any income arises** from that asset, then that **income is clubbed** with the **transferor’s income**.
---
### 🔹 So, in your case:
| What Happens | Who Pays Tax |
| -------------------------------------------------------------------------- | ------------------------------------------- |
| Gift of money by husband | ❌ No tax (gift is exempt between spouses) |
| Income earned by wife (e.g. interest from FD, rental, dividends) | ✅ Taxable in **husband’s hands** |
| If wife **re-invests** income earned from original gift (secondary income) | ✅ Taxable in **wife’s hands** (not clubbed) |
---
## 💡 Example:
* Husband gifts ₹5 lakhs to wife.
* Wife puts it in a **fixed deposit** earning ₹30,000 interest annually.
* This ₹30,000 is **clubbed with husband's income** and he pays tax on it.
* If the wife later invests that ₹30,000 and earns another ₹2,000 interest:
* That ₹2,000 **is not clubbed**, and is taxable in **wife's hands**.
This second-layer income is called "**accretion on accretion**" and is **not clubbed**.
---
## ✅ Summary
| Aspect | Tax Treatment |
| ------------------------------- | --------------------------------------------------- |
| Gift from husband to wife | ✅ Exempt from tax (gift between relatives) |
| Income earned from that gift | ❌ Taxable in **husband's** hands (clubbing applies) |
| Reinvestment income (secondary) | ✅ Taxable in **wife’s** hands |
---
Let me know if you'd like a **sample gift deed format**, or help calculating the **tax implication** of a specific investment made using gifted funds.
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