Issue with not clubbing income on ITR

I have one queri as below:

On AY 21-22 and AY 23-24 I did few big transctions(More than 10L on each financial year) to my wife's account who is not earning and did some post office TD with her name from where some Interest also got generated(for AY 21-22 around 70k and AY 23-24 around 80K)

Now I did not show this interest amount in my itr(I filed itr for AY 21-22 and 23-24 successfully) file since i was in a notion that if wife's income is withing the exemption limit(which is 2.5L) no need to show it as my income and it will be treated as her income.

But recently I found that Income tax department has asked to file itr for AY 21-22 and AY 23-24 for my wife after registering to income tax dept site with my wife's PAN.
But for both the AY last date is over for filing.This is due to the fact that my wife's PAN is linked with wife's ph no.And she has missed the messages from income tax dept for return file .

Now my question is what to do in this junture.Since i am 55 years old and a heart patient who is thinking of retiring soon i am really worried about this discrepency.

Can I inform income tax dept the mistake I commited of not clubbing wife's income with mine.
If possible then how to inform regrading this issue.Is it through Grivence.

What should be the penalty for this mistake.
Can you please elaborate a bit how to procced furthr in this situation.
Does CA can help in this regrad.

Please let me know any other way out.
Thanks,
Koushik Das

Hi Koushik,

Thanks for sharing your concern. I understand the worry, especially given your health and situation. Let me break down the issue and possible solutions clearly:

Issue Summary:

You transferred money to your non-earning wife’s account and the interest income was earned in her name.
You did not include this interest income in your ITR by clubbing it with your income.
Income Tax Department is now asking your wife to file ITR for AY 21-22 and AY 23-24.
Due date for filing those returns is already over.
You want to know how to regularize this situation and avoid penalty.

What Does the Law Say?

Under Section 64(1A) of the Income Tax Act:

Income from assets transferred to spouse (who is non-earning) is clubbed in the transferor’s hands.
This means, interest income earned on money you gave to your wife must be included in your ITR, not hers.
Even if the wife’s income is below exemption limit, the clubbing provision still applies, so technically the income should be added to your income.

What You Should Do Now:

File Revised Return for Yourself:
- For AY 21-22 and AY 23-24, you can file revised returns under Section 139(5) to include the interest income from your wife’s account.
- Revised returns can be filed within 3 years from the end of the relevant assessment year.
- For AY 21-22 (FY 20-21), you still have time till March 31, 2025.
- For AY 23-24 (FY 22-23), the time limit is also not expired.
- In the revised return, report the interest income earned in your wife’s name under “Income from Other Sources” and pay any additional tax if applicable.
Explain to Income Tax Department:
- You can submit a letter/explanation with the revised return stating that earlier the interest income was not clubbed, but now you are correcting the mistake voluntarily.
- This shows good faith and transparency.
For Your Wife:
- Your wife need not file ITR for these years if her only income was that interest (below exemption limit).
- You can inform the department through a letter or grievance (on the e-filing portal) stating that interest income belongs to you and has been clubbed in your revised return.
Penalties & Interest:
- Since you are voluntarily revising the return, penalty can be avoided or minimized.
- You may have to pay interest under Section 234A/234B/234C for any delay in payment of tax on this income.
- If you cooperate and rectify voluntarily before the department issues a notice, it usually reduces the risk of penalty.
Can a CA Help?
- Yes, a CA can help prepare and file revised returns correctly.
- CA can also help draft letters/explanations for the department and represent you if needed.

Steps You Should Take:

Collect details of interest income earned in wife’s account for AY 21-22 and AY 23-24.
Calculate additional tax liability (if any) and interest.
File revised returns for AY 21-22 and AY 23-24 including clubbed income.
Submit explanation with the revised returns.
Inform IT department via grievance about your wife’s ITR filing and clarify clubbing.
Monitor IT portal and respond to any communications promptly.

Summary

You can and should file revised returns clubbing wife’s interest income in your ITR.
Voluntary correction helps avoid penalties.
No need for your wife to file ITR if only income is that interest.
Interest on tax dues may apply but no heavy penalty if you act now.
Consult a CA for smooth handling.