20 November 2013
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 YES,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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