Hello,
I have few questions regarding maximizing wife capital, however before I ask my question let me setthe context.
My wife is working and earns salary from the employer, She use some amount for shopping and invest rest of the amount. Due to her over all income company deduct dome TDS and she also has some taxable income from investment. I would like to maximize wife capital in whatever way possible, however I cannot transfer amount to her without adequate consideration otherwise income clubbing rule gets in to action. So, I would like to use "adequate consideration" part to maximize wife capital. I also know that I can transfer amount to wife account maximum up to 50,000/- even without "adequate consideration", however I would like to transfer more amount.
Questions:
Q1) Can I transfer amount used for shopping to wife account? Will this be considered as "adequate consideration"?
What will my wife do with the transferred amount: she will invest somewhere, however its income should not be clubbed in "income clubbing rule" because transferred amount belongs to some expenses she has already done. Is my explanation correct?
Reasoning: As I am transferring amount which she has already expensed out so, my transferred amount is not used for investment purpose. As no income is generated from this amount so income clubbing rule will not kick in here.
Q2) Can I transfer TDS deducted from her capital and taxes paid with respect to investment income to the wife account? Will this be considered as "adequate consideration"?
What will my wife do with the transferred amount: she will invest somewhere, however its income should not be clubbed in "income clubbing rule" because transferred amount belongs to some expenses she has already done. Is my explanation correct?
Illustration: Suppose wife earns Rs. 12,00,000 from salary and Rs. 2,00,000 from investment income [lets not go in to the specific of any income for simplicity], So total TDS + Self assessment tax from income of Rs. 14,00,000 will be Rs. 2,41,800/-. Can I pay Rs. 2,41,800/- to wife as part of "adequate consideration" and increase her capital?
Reasoning: As I am transferring amount which she has already expensed out so, my transferred amount is not used for investment purpose. As no income is generated from this amount so income clubbing rule will not kick in here.
Thanks & Regards,
Siddharth
CAclubindia
