Urgent query
This query is : Resolved
17 December 2012
if an individual retired govt employee invest his gratuity income as FDR in the name of his spouse then the interest from such FDR will be taxable in the hands of spouse or ind himself ??
17 December 2012
In the hands of Individual irrespective of the fact whether the gratuity is exempted or not.[Sec 64(1)(iv)]
17 December 2012
is there any legal way that an ind can transfer an amount to his spouse so that it can invest in the name of spouse only...??
02 August 2025
Here’s a clear explanation for your urgent query on **gratuity investment in spouse’s name and taxability of interest**:
---
### **Issue:**
* An individual (retired govt employee) invests his **gratuity income** as FDR in the **name of spouse**.
* Question: **Who is taxable on the interest income — the individual or the spouse?**
---
### **Relevant Law: Section 64(1)(iv) of Income Tax Act**
* Income arising from **transfer of income without adequate consideration to spouse or minor child** is **included in the transferor’s income**.
* So, even if the FDR is in the **spouse’s name**, if the amount invested originally belongs to the individual, **interest income will be taxable in the hands of the individual**.
---
### **Answer:**
* Interest on FDR from gratuity income invested in spouse’s name will be **taxed in the hands of the individual who transferred the amount**, **not the spouse**.
* This applies **irrespective of whether gratuity was exempt or not**.
---
### **Legal Way to Transfer Money to Spouse for Investment:**
* **Gifting:** The individual can gift money to spouse.
* Gift is not taxable in the hands of spouse.
* However, under Section 64(1)(iv), any income from the gift (like interest) will still be taxable in the hands of the individual if the gift is without adequate consideration.
---
### **How to make income taxable in spouse’s hands legitimately?**
* The **spouse should have independent sources of funds**.
* Transfer should be by way of **genuine sale or transfer for adequate consideration**.
* Or, spouse should earn income independently.
---
### **Summary:**
| Scenario | Taxability of Interest Income |
| ------------------------------------------------------------------- | ------------------------------------------ |
| FDR invested by individual in spouse’s name (without consideration) | Taxable in individual’s hands (transferor) |
| FDR invested by spouse with spouse’s own funds | Taxable in spouse’s hands |
| Genuine transfer with adequate consideration | Taxable in spouse’s hands |
---
If you want, I can help draft a detailed note or provide case laws supporting this. Let me know!
---
### **Issue:**
* An individual (retired govt employee) invests his **gratuity income** as FDR in the **name of spouse**.
* Question: **Who is taxable on the interest income — the individual or the spouse?**
---
### **Relevant Law: Section 64(1)(iv) of Income Tax Act**
* Income arising from **transfer of income without adequate consideration to spouse or minor child** is **included in the transferor’s income**.
* So, even if the FDR is in the **spouse’s name**, if the amount invested originally belongs to the individual, **interest income will be taxable in the hands of the individual**.
---
### **Answer:**
* Interest on FDR from gratuity income invested in spouse’s name will be **taxed in the hands of the individual who transferred the amount**, **not the spouse**.
* This applies **irrespective of whether gratuity was exempt or not**.
---
### **Legal Way to Transfer Money to Spouse for Investment:**
* **Gifting:** The individual can gift money to spouse.
* Gift is not taxable in the hands of spouse.
* However, under Section 64(1)(iv), any income from the gift (like interest) will still be taxable in the hands of the individual if the gift is without adequate consideration.
---
### **How to make income taxable in spouse’s hands legitimately?**
* The **spouse should have independent sources of funds**.
* Transfer should be by way of **genuine sale or transfer for adequate consideration**.
* Or, spouse should earn income independently.
---
### **Summary:**
| Scenario | Taxability of Interest Income |
| ------------------------------------------------------------------- | ------------------------------------------ |
| FDR invested by individual in spouse’s name (without consideration) | Taxable in individual’s hands (transferor) |
| FDR invested by spouse with spouse’s own funds | Taxable in spouse’s hands |
| Genuine transfer with adequate consideration | Taxable in spouse’s hands |
---
If you want, I can help draft a detailed note or provide case laws supporting this. Let me know!
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