Taxation on investment in spouse's name

I have query on saving income tax. I am an individual falling in 30% tax bracket.

I invest 5 lakhs in a equity oriented mutual fund in my wife's name who is a housewife(who has no income). After exactly 1 year, she takes out only the profit from the mutual fund (say 50k is the profit assuming a 10% growth). She invests this tax free profit of 50k in a fixed deposit in her name to earn a stable income. She continues to do this every year(assuming an average 10% growth every year) to increase the fixed deposit amount.

Will the interest earned from this fixed deposit be clubbed with my income for taxation ?

My understanding is the profit belongs to my wife and she can invest it in fixed deposit to earn stable income and she doesn't have to pay any tax as long as it falls within the slabs.

Could anyone advice me if this tax saving plan sounds valid.

Thanks and Regards,

Kamal

 

Replies (7)

Yes, your understanding is correct. Working can be anything in similar fashion.

Yes. I fully agreed with My Dear Dhirajala Rambhia Sir...

 

If it's less than ceiling limit. Then no need tax treatments for the FD interest

Your understanding is correct

Please read following examples for better under standing

1. Mr Sharma invests Rs 10 lakh in a fixed deposit (FD) at a bank, in his wife’s name. Now Interest income on FD will be clubbed with his (Mr. Sharma) income. Investment made by Mrs. Sharma out of such Interest income will be taxed on her own income.  

2. Where the assesse transferred a flat to his spouse, and the spouse invested the rental income in fixed deposits, then rental income alone is clubbed in the hands of the assessee, while the interest income from the fixed deposit is clubbed in the hands of the spouse only.

Please explain tha 2 option...

After transferred the property the income to Receiver's (Spouse) hand not to Assessee hand.

Rental income is to be taxed under assessee's hand

and interest from the fixed deposit, invested using rental income is taxed under spouse's hand.

Before transfering The Let out property is assessee hand. After transfered it's Spouse hand and Spouse is the owner of the property. The Rental income also owner's (SPOUSE) hand.

It's not efeected to the assessee hand (Income)...

Before transfering The Let out property is assessee hand. After transfered it's Spouse hand and Spouse is the owner of the property. The Rental income also owner's (SPOUSE) hand.

It's not efeected to the assessee hand (Income)...

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