Sir, I am prasanna , retiring from Central Govt service shortly. Retirement benefits to the tune of about 65 lakhs , I want to transfer it to the account of my wife. What will be the tax implication. Whether this decision is prudent or not. Just I want to make my wife financially independent I smy motto of transferring the amount

Ans: Amount given to relatives is not an income in the hands of recipient. However, clubbing provisions will apply for income earned out of investment made (if any) from gift received from spouse.

Ans: Gift received from relative (spouse included in its meaning) is not considered as income from other sources and will not be liable to tax. But before transfer, firstly the pension benefit received by you. At that time, you are liable to pay tax. Further, income earned by spouse from the amount invested will be clubbed in the hands of husband (gift giver)

Ans: Dear Prasanna,

Firstly, congratulations on your upcoming retirement. It's a significant milestone, and I'm here to help you navigate the financial aspects of it.

Now, coming to your question about transferring your pension benefits to your wife. As per the Income Tax laws in India, any gift received from specified relatives, such as a spouse, is not treated as income. Therefore, it is fully exempt from income tax. So, if you decide to give your pension benefits to your wife as a one-time gift, there won't be any immediate tax implications for her.

However, there's an important aspect to consider. While the gift itself is tax-free, any income generated from this gift (for example, if your wife invests this amount and earns interest or dividends) would be clubbed with the income of the giver, i.e., you, and taxed accordingly. This is known as the clubbing of income.

In conclusion, gifting your pension benefits to your wife could be a good idea if the aim is to let her manage the funds. However, the income generated from the gifted amount would still be taxable in your hands.

I hope this clarifies your query.

Best,
Hardik

Ans: Income from asset (including money) transferred to spouse without consideration is clubbed in the hands of the transferor. However, amount transferred to spouse will not be subject to tax.