My wife is in share trading. The money was given by me. Explanation of Income Tax Rules

Answer: As per the provisions of Indian tax laws, any gift given by one spouse to the other is completely tax free in the hands of the recipient and there is no tax implication for both the spouses. However, as per the provisions of section 64 of the Income Tax Act, any income arising to the spouse from the property gifted from time to time is required to be clubbed with the income of the gifted spouse. As long as the marriage continues, the clubbing provision will remain in force. If the asset is converted into any other form, the clubbing provisions will still apply to the extent of the value of the original gift. Please note that the clubbing provisions apply only to the principal amount of the gift and do not apply to income that arises on account of investments made out of such income. Money given by you to your wife from time to time should be treated as a gift given by you and income in respect of such principal amounts of gifts made at various points from time to time should be included in your income from the beginning needed to be added. Clubbing provisions will be applicable even if she is an educated woman and has earned income by applying her knowledge and skills. Since the time and prior period to revise ITR for the financial year 2019-20 is already over, you cannot do anything for the past income.

However, I would advise you to start adding the income related to gifted money to him in your income and for the remaining income he will have to file his ITR if the remaining income still exceeds the basic exemption limit. I understand the difficulty in separating income between income directly due to a gift given by you and the remaining income generated due to investments of already clubbed income. You can make this allocation by dividing the total income by the total ratio of all gifts given and subtracting the remaining amount from its total capital.

If the entire money invested represents savings from the PIN money you give to run the household, the clubbing provisions will not apply and hence the entire income may be shown as his income. What amount can be considered as pin money and not gifted by husband Various factors should be considered like income of husband, amount given by husband as household allowance, reasonable monthly household expenses etc. I want to give you a word of caution. Don’t try to use it as a tax evasion instrument and add the relevant part of his income to your income on a logical and rational basis.

Balwant Jain is a tax and investment specialist and can be contacted on Twitter at jainbalwant@gmail.com and @jainbalwant.