Taxability of gift by husband to wife

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This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

12 October 2011 Hi,
Please help!
A Client wants to gift around 5-10 lakhs to his wife. Which would be a better option and their implications ?
(i) Cash gift- which would later be invested by wife in shares for trading/ investment.
(ii) Buy shares and then Gift those shares worth 5-10 lakhs to wife.
Is there any legal formality to be completed while gifting to wife?.
thanks

CA.E.Deepan Chakravarthy

CA.E.Deepan Chakravarthy (Expert)

12 October 2011 Your client can gift, anything in cash or kind, to his spouse.But, the income from the investment, which is made out of gift amount, will be taxable in the hands of transferor/donor not in the hands of transferee/donee, because clubbing provision would attract.
It is better to give a loan and it should be given by way of Account payee cheque/DD.

Querist : Anonymous

Querist : Anonymous (Querist)

12 October 2011 Sir,
One more option
Can the client buy a land worth 10 lakhs and then gift it to his wife with no tax implication for either.

Thanks in advance

Querist : Anonymous

Querist : Anonymous (Querist)

12 October 2011 If shares are gifted and dividend recd will be clubbed in the hands of the husband and exempt. What about Capital gain on sale of those shares(short term/ long term)?.(Long term is so far exempt). What about reinvestment of those capital gains and income received thereon?. Will clubbing cease/continue to apply?

CA.E.Deepan Chakravarthy

CA.E.Deepan Chakravarthy (Expert)

12 October 2011 I agree with both and capital gain will be assessable in the hands of transferee.

Message likes : 1 times

CA SUMiT PATWARi

CA SUMiT PATWARi (Expert)

12 October 2011 In my views, the capital gains on sale of shares or building will be taxable in the hands of the transferee... - no clubbing !
Only incomes like dividend/interest/rent which are directly generated from the gifted asset will be taxable in the hands of the transferor - clubbing provisions apply !
Income from incomes generated are always taxable in the hands of the transferee - no clubbing !

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