Taxation on investment in spouse's name

Tax planning 326 views 7 replies
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9 Points Joined July 2017

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

 

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On 24 September 2017 at 14:34 Report
Replies (7)
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SEO Sai Gr. Hosp.
196912 Points Joined July 2016

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

2 Reply
On 24 September 2017 at 14:46
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"Do the Right Thing...!!!"
128111 Points Joined January 2015

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

2 Reply
On 24 September 2017 at 20:03
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Student CA Articleship
848 Points Joined June 2015

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.

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On 25 September 2017 at 16:24
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"Do the Right Thing...!!!"
128111 Points Joined January 2015

Please explain tha 2 option...

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

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On 25 September 2017 at 16:32
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Student CA Articleship
848 Points Joined June 2015

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.

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On 25 September 2017 at 16:40
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"Do the Right Thing...!!!"
128111 Points Joined January 2015

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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On 25 September 2017 at 17:00
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"Do the Right Thing...!!!"
128111 Points Joined January 2015

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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On 25 September 2017 at 17:00


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