Clubbing with spose

Prakash (Business) (51 Points)

11 September 2010  

Hello,

I have a query. If a husband gifts money (by cheque) to his wife and wife invests that money in such a way (say Mutual Fund-Dividend Payout) that it generates Tax Free Income (dividend). Since dividend from Mutual Fund is taxfree it would not be clubbed. As I understand, any income subsequently generated from this tax free income (dividned) would be free from clubbing. Also, when original investment of Mutual Fund is sold after 12 months, the long term gain also would be tax free. As I understand, this way the clubbing between spouses can be avoided since income from income would not invite clubbing. Please confirm/advise.