As per Assessment Year 2006-07
QUICK LOOK
- Income from gifts to the wife are clubbed with that of the
husband and vice-versa.
- Income on income is taxed in the hands of the recipient of the
gift.
- The incomes of a husband and wife who are partners in a firm are
exempt from tax.
- Equity shares hold for more than 12 months do not attract tax if
they have suffered STT.
- If such shares are gifted to the spouse, who then sell them,
clubbing doesn't apply.
- Income from invested gains are taxed in the recipient's hands.
Income that arises from any assets which have been gifted to one's
spouse is clubbed with the income of the person making the gift. But in
case of income earned on the income from the assets that have been
gifted, like in case of reinvestment, it will not be clubbed with the
income of the person making the gift. Such income will be taxed as the
independent income of the recipient spouse.
Spouse as a Partner
Both the husband and wife can be partners in the same firm. As a firm
is a legal entity, income earned by the partners is taxed as the income
of the firm and the share of profit accruing to each partner is tax
exempt in their hands. With this clause, the capital and the net worth
of the wife can be enhanced resulting in higher income in the future
years.
The remuneration paid to partners is deductible in the hands of the
firm up to a prescribed ceiling. However, if the remuneration is paid to
the wife in the same firm in which the husband is also a partner, then
the remuneration will be clubbed with the income of the husband if he
holds substantial interest i.e. a share of more than 20% in the profits
of the firm, in this case.
In case the wife possesses technical qualifications, any remuneration
received will not be clubbed with the income of the husband but it will
be taxed in her hands only.
Gift to Spouse
Equity shares of a listed company held for more than 12 months are
treated as long-term capital assets and any gain on the sale of this
equity shares through recognised stock exchange is exempt from tax.
If the equity shares are gifted to the spouse of if it is purchased by
the spouse with the money gifted to her, any long-term capital gain on
such shares will not be subject to tax. But, if the income is generated
from further investments the said capital gain in other avenues, it will
be taxed as her individual income.
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