WARNING: Do not club your income
Transferring a part of your income to the spouse or a minor child who has a meagre or no taxable income is being watched by income tax officials. If you are showing a part of your income as income of your spouse, child or anybody else, you are not doing the right thing. Any income arising to your spouse or daughter-in-law from an asset transferred to him/her without adequate consideration will be clubbed in your hands. For instance, the rent received by your wife from a house property you gifted her will be taxed as your rental income. This provision, however, will not apply if the assets are transferred with an agreement to live apart. Any income (salary and commission) arising to the spouse from any concern, be it a proprietorship concern, partnership firm or company in which the individual has substantial interest, will be clubbed in the hands of the individual and will be taxed accordingly. However, in cases where the spouse possesses technical or professional qualification, and the income is attributable to the application of such technical or professional knowledge and experience, clubbing provisions do not apply. a deduction of Rs 60,000 or the amount actually paid (whichever is less) will be available.
Expenditure must be actually incurred by resident himself or dependent relative for medical treatment of specified decease or ailment. The diseases have been specified in Rule 11DD. A certificate in Form 10 (I) is to be furnished. Relief for salary arrears/advance under Section 89 (1) Relief under Section 89 (1) is available to an employee when he receives salary in advance or in arrears, or when in one financial year he receives salary of more than 12 months (when wage settlements/ payments take retrospective effect), or receives ‘profit in lieu of salary’ covered under Section 17 (3). Relief under Section 89 (1) is also admissible on family pension.
These are only a few sections relating to tax exemptions which we have discussed here. There are many more of them regarding donations and physical/ mental disability which are offered to specified income groups, available to anyone who is keen to avail the tax exemptions.