Tax for insurance commission

My father-in-law, who is into general insurance business, has taken an insurance agency in my wife's name [because I believe IRDA doesn't yet allow multiple agencies in the name of a single agent]. Father-in-law does business and my wife gets commission credited to her account after deduction of applicable TDS. We transfer this money to father-in-law's account. The amount credited to wife's account is now appearing in the form 26AS. My wife’s own income is below the taxable limit right now. Should the insurance commission be shown in wife's ITR? If so how? Is this a correct arrangement? What can we do to keep this arrangement within the legal framework so that the taxman doesn’t raise any objections?
Replies (1)

Since the agency is in the name of your wife, the commission received is her income. She would have to pay tax on it and will have to show it in her ITR as income from other sources. 

The amount transferred to father in law can be shown as gift from his daughter which will then not be taxable in his hands. As such, the wife cannot claim any benefit on amount transferred to her father. 

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