NRI clubbing Capital Gain profits in an ITR ?

I have Client their details below

In January 2022, an NRI husband purchased a home in the wife's name (also NRI) for 20 lakh rupees.

Husband took out a joint loan for 18Lakh rupees

And paid 2 lakh payment via his savings account

Husband paid off all loans and is preparing to sell the house for 28 Lakh in February 2024.

How will tax calculations work out since the wife will receive 28 Lakh Should the wife return the husband's 28 lakh rupees? Because of the clubbing income ?

Both earning Below 1 Lakh indian income Just assume 1 Lakh income FY 2023-24

Suppose 6 Lakh long term capital gain after indexation and all

question 1 - In addition, clubing rules will apply, So how to report profits from clubbing income for both the wife and the husband ITR which section in FY 2023-24

question 2- can wife invest that 28 Lakh and interest or earning from that 28 lakh also will be clubbed with husband income ?

question 3 - or wife should return that 28 lakh amount to husband ?

question 4 - can wife gift that 28 lakh to immediate relatives and then their is no obligating for clubbing profit ?

Hey Riya! Your client’s situation involves some classic clubbing of income issues under Indian tax laws for NRIs. Let me break down answers to your questions clearly:

Facts Recap:

NRI husband bought house in wife’s name in Jan 2022 for ₹20L.
Joint loan ₹18L; ₹2L from husband’s savings.
Husband repaid all loans.
Sale in Feb 2024 for ₹28L → LTCG ~ ₹6L.
Both have <₹1L Indian income otherwise.

Question 1: Clubbing of Capital Gains — How to report in ITR?

Clubbing applies because: Property is in wife’s name but consideration paid by husband.
Under Section 64(1)(iv) of Income Tax Act: Income from asset transferred to spouse without adequate consideration is clubbed in transferor’s (husband’s) income.
Capital gains from sale of property in wife’s name will be clubbed in husband’s ITR.
Wife should not declare LTCG income; husband must report it in his ITR under Capital Gains (Schedule CG).
Wife may file NIL return or show only her own income.

Question 2: Interest or income from reinvestment of ₹28L — Clubbing applicable?

Yes, income arising from reinvestment of the transferred amount is also clubbed under the same section (64(1)(iv)).
So, interest, rent, or any income from the ₹28L investment will be taxed in husband’s hands.

Question 3: Should wife return ₹28L to husband?

Legally, since the property was purchased with husband’s money, wife should ideally return the amount to husband to avoid tax complications.
This will support that the asset belongs to husband and clubbing applies fairly.

Question 4: Can wife gift ₹28L to immediate relatives to avoid clubbing?

Gift to relatives defined under Income Tax (like parents, siblings, spouse, lineal descendants) is not taxable.
However, clubbing provisions will still apply if the asset is transferred back to relatives or if income arises from such property transferred without adequate consideration.
To avoid clubbing, the asset must be transferred for adequate consideration, or properly documented gift transactions should be done following IT Act provisions.

Summary Table

Question	Answer
Clubbing of Capital Gain	LTCG included in husband’s income (Section 64(1)(iv))
Income from reinvestment	Clubbed with husband’s income
Returning ₹28L to husband	Recommended to avoid disputes & tax issues
Gifting ₹28L to relatives	Gift exempt from tax but clubbing still applies if without consideration

Additional Notes:

Since both are NRIs, ensure capital gains tax on sale of property in India is paid (plus applicable TDS).
Proper documentation is key for claiming clubbing and gifts.
Consider consulting a tax advisor to prepare ITRs correctly.