If some pocket money is given to wife every month e.g. 5k-10k, and she puts some accumulated amount in share trading. What and whose tax liability would be there for the income generated through such investment - Husband's or Wife's?
Munish (newbie) (55 Points)
24 January 2013If some pocket money is given to wife every month e.g. 5k-10k, and she puts some accumulated amount in share trading. What and whose tax liability would be there for the income generated through such investment - Husband's or Wife's?
VARCHASVA
(Student CA Final )
(30 Points)
Replied 24 January 2013
Dear Munish
your wife is neither earning this income from any business or profession nor from employment, it is simply the income earned by u which has been transferred to ur wife (without any consideration). According to income tax act 1961 it shoud be considered as transfer of income for tax evasion purpose and it shoud be clubbed back to your income. so whatever your wife is earning from using ur income will be considered as yours and u have to pay tax on it.
With Regards:
VARCHASVA
Munish
(newbie)
(55 Points)
Replied 25 January 2013
Dear Sir, extension of the same query :
First year, when money is transferred, some income is there, and it is clubbed with husband's income. Next year no new money is transferred but again income is there from same investment and same in subsequent years.
For how many years, the income would be clubbed with husband's income ? Imean to say, after how many years, the originally invested money would finally belong to wife only ?
Utsav Saraf
(Article assistant)
(33 Points)
Replied 25 January 2013
Munish
(newbie)
(55 Points)
Replied 26 January 2013
But this income both from cash equities and Futures & Options would come under short term capital gain or Business income ?
CA PARAS BAFNA
(Practising CA )
(33423 Points)
Replied 27 January 2013
Income earned from income already clubbed is not taxable in the hands of the husband.
Suppose wife earns Rs. 50000/ (clubbed) and reinvests the same and earns 12000/-on it.
Rs. 12000 is not clubbed.
.
CA PARAS BAFNA
(Practising CA )
(33423 Points)
Replied 27 January 2013
Income from Cash equities can be shown under the head Capital Gains if the transactions are not frequent and
of low volume of 50-100-200 shares.
F&O- Business Income.
CA PARAS BAFNA
(Practising CA )
(33423 Points)
Replied 27 January 2013
For how many years, the income would be clubbed with husband's income ? Imean to say, after how many years, the originally invested money would finally belong to wife only ?
..
In one Good Year the wife should transfer the original sum back to her husband and in future -promise only to take money for meeting the house hold expenses only. In case money is required for investment activity -she may request for a loan to him.
.
Once the money is unexpecedly received back by the husband, he will definitely rely more and extend interest free loan to her. .
Utsav Saraf
(Article assistant)
(33 Points)
Replied 28 January 2013
If the deposit represents her savings out of moneys given to her even by husband for household expenses, such savings described as pin money is not treated as amount transferred without consideration, so that the income from Pin money will be her own income. Clubbing provisions will have no application in such cases even as held in R. B. N. J. Naidu v CIT (1956) 29 ITR 194 (Nag) and R. Dalmia (Decd.) v CIT (1982) 133 ITR 169 (Del). Further, pin money saved will not be clubbed in hands of wife or in hands of husband.
Parimel
(Administration)
(41 Points)
Replied 28 January 2013
IN RBNJ Naidu's case, the issue was whether accumulated pin money deposited by wife in the bank account is required to be taxed as income from undisclosed sources? The court had held that since the assessee has prima facie explained the sources, therefore there cannot be a addiiton on this ground in the assessee's hand. I don't think the court has held that any income from such transfers of pin money cannot be clubbed.
in the case of R Dalmia, the court on one hand has held the interest of Rs. 394 on account of the pin money deposited in bank by one wife is not taxable in the hands of the husband but on the other hand has held that the income arising out of the immovable property valued at Rs. 88,100 and transferred to second wife, is required to be taxed in the hand of the assessee. This ambiguity seems to have arisen on account of the issue of double taxation; both in the hands of the wife and husband.
Therefore, i am of the opinion that it is not conclusive that income from pin money cannot be clubbed in the husband's hand or vice-versa.
s sudarshana
(purchase managerf)
(22 Points)
Replied 24 August 2014
Shailendra Jaiswal,
(Accountant)
(185 Points)
Replied 25 August 2014
Pin Money means "A reasonable allowance given to the wife by her husband for
her dress and usual household expenses"
Pin Money is not Taxable.
u/s 64(1) (iv) of the Income Tax Act-1961, any income arising from assets
transferred to spouse without adequate consideration is taxable in the hands of
the transferor and not in the hands of transferee. However, if asset is acquired
by the spouse out of pin money (i.e., a reasonable allowance given to the wife
by her husband for her dress and usual household expenses) then the income
from such assets cannot be clubbed with the income of her husband. [R.B.N.J
Naidu Vs CI
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