Wife’s income attracts I-T clubbing rules

INCOME EARNED BY WIFE FROM MONEY GIFTED BY HUSBAND WILL BE CLUBBED WITH LATTER’S INCOME

QMy spouse has invested in senior citizen saving scheme in her name with her PAN from the funds in our joint savings bank account by giving the cheques under her signature considering the amount as a gift from me. I have not made any documents for giving these funds to her. She is a housewife without any considerable income of her own and I wanted her to have some income of her own through creating senior citizen saving scheme accounts from my funds. Even with this income, she is not having any taxable income. I need your opinion on taxability of the funds that she has invested. PURUSHOTTAM

Bengaluru

A) Section 64(1)(iv) of the Income Tax Act specifies that the income derived by the spouse of an assessee from the assets directly or indirectly transferred without adequate consideration will be clubbed in the income of transferor. Therefore, the interest income generated out of the said funds will be clubbed with your income.

QI am now paying `8,000 towards my house rent. Can you please clarify if the actual house rent paid by me is eligible as deduction. My pension is `22,000 per month. Being a bachelor, I would like to give my retirement benefits to my parents and relatives. Do I need to pay any tax for this?

DAMODAR M Hyderabad

A) The deduction in respect of rent paid by an assessee can be claimed subject to certain conditions laid down under Section 80GG:

1) The rent paid is in excess of 10 per cent of his total income before allowing any deduction under this section.

2) The rent paid is in respect of accommodation occupied for the purpose of his own residence.

3) The deduction is to be claimed only in cases where any residential accommodation is not owned by the assessee or his spouse or minor child or Hindu undivided family of which he is a member.

However, the deduction in respect of rent paid will be denied only where the assessee, his spouse or minor child or Hindu undivided family of which he is a member, owns any residential accommodation at the place where assessee resides or performs the duties of his office or employment or carries on his business or profession.

In cases, where the assessee owns any residential accommodation at any other place and he claims concession in respect of self-occupied house property in respect of such accommodation, the deduction available under this section will be denied even if he does not own any residential accommodation at the place where he ordinarily resides or performs the duties of his office or employment or carries on his business or profession.

4) The assessee, being an employee, who is entitled to house rent allowance(HRA) from the employer is eligible for exemption under section 10(13A) of this Act but not for deduction under section 80GG.

5) The amount of deduction is restricted to 25% of total income or `5,000 per month (w.e.f. FY2016-17), whichever is less.

Therefore, the deduction allowable for rent under the above mentioned section after applying the provisions mentioned above will be restricted to `5,000 per month.