International Women’s Day is celebrated all over the world on 8 March i.e. two days later. If you want to give a gift to your wife on the occasion of Women’s Day this time, then investing in her name can be a better option. However, how the income from such investments is also taxed, which must be known.
Income Tax Rule says that if the husband makes any investment in the name of the wife, then it will be considered as a gift. Tax experts say that the wife will have to disclose the investment amount as exempted income in Schedule EI of the Income Tax Return (ITR) form.
Let’s understand this by example…
Suppose, if the husband has invested in the Senior Citizen Savings Scheme (SCSS) in the name of the wife, then the interest income will be added to his total income in the Schedule SPI of ITR. However, the wife is not required to disclose the income so accumulated.
Tax on cash gifts received from relatives
As per Income Tax rules, cash gifts received from relatives are completely tax free. Relatives would include husband or wife, siblings, brother or sister of husband or wife.
Tax on cash gifts from others
According to section 56(2)(x) of the Income Tax Act, 1961, if the total wealth received by an individual exceeds Rs 50,000 during a financial year, then tax will be payable on it. Such amount is taxed as income from other sources. Tax expert Balwant Jain says that if the total cash received from one or more people in a financial year exceeds Rs 50,000, then such amount will be taxed as per the applicable slab rate. Therefore, the total amount of gifts received in a financial year should not exceed Rs.50,000 to avoid tax.