Namaskar, I want to start investing in my wife's name, she is not an earning member of our family. If I invest in her name, the income from investment will be treated as her own gains or it will be added to my income tax return?

Ans: Hi Mahipal
This action will get covered under the clubbing of income provisions and your wife's income from the investment will get added to your income

Ans: Gift received in the form cash from spouse is not an Income. However, income earned from amount received as gift (after investment) will be clubbed in the hands of Spouse.

Ans: Yes, the profit on investment in the stock market in the name of your wife, who is a housewife, is taxable if the money investment has been provided by you. The income earned by a wife from her investments is considered to be the income of her husband and is clubbed with his income for tax purposes under income tax section 64. However, there are certain exceptions to this rule.

Exceptions to Clubbing of Income rule:-
• If the wife invests from her own personal income, such as income from a part-time job or rental income, and the husband has no control over the investments, then the income from these investments will not be clubbed with the husband's income.
• If the wife invests from her own funds that she inherited or received as a gift, then the income from these investments will also not be clubbed with the husband's income.
• If the wife is an investor and earns income from investing in shares, then this income will be taxed separately at the applicable rates under the Income Tax Act.

Ans: Understanding Tax Implications for Gifts and Investments
1. No Tax on Money Given to Your Wife

Money transferred to your wife for household expenses or gifts is not taxable.
Gifts given to your wife are exempt under Section 56(2) of the Income Tax Act if given without consideration.
2. Clubbing of Income Rules

Income earned from the money you gave to your wife could be taxable under your name.
As per Section 64(1)(iv) of the Income Tax Act, any income earned by your wife from assets funded by you will be clubbed with your income.
3. Taxation on Income from Investments

Dividend Income or Interest Income: If your wife earns interest or dividends from the investments made using your funds, this income will be added to your taxable income.
Capital Gains from Investments: Income from the sale of mutual funds or equities (capital gains) is taxed in her name since it's her investment decision. It will not be clubbed with your income.
4. Money Received from Son

Any money your wife receives from her son is exempt under the Income Tax Act as it is considered a gift from a relative.
Income generated from such funds (e.g., interest, dividends) will be taxed in her hands.
5. Filing of Income Tax Returns by Your Wife

Filing returns is a good practice, even if her income is below the taxable threshold.
This ensures her financial independence and tracks her income and investments systematically.
What Should You Do?
1. Maintain Proper Documentation

Keep records of the money transferred to your wife. This helps establish the source of funds.
Document the funds received by your wife from her son.
2. Separate Accounts for Clarity

Encourage your wife to maintain a separate bank account for her investments.
This will ensure transparency and clarity in case of future tax assessments.
3. Monitor Clubbing Provisions

Regularly review investment income to check if it’s liable for clubbing.
Capital gains are not clubbed, so your wife can continue her equity and mutual fund investments.
4. Seek Professional Guidance

Consult a Certified Financial Planner or a Chartered Accountant.
They can help you structure investments and income to minimise tax liabilities.
Final Insights
There is no direct tax liability on you for money gifted to your wife. However, income from such funds may get clubbed with your income as per tax laws. By planning investments and maintaining proper records, you can manage tax compliance efficiently.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment