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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Tax Provisions for Special Cases

Ramesh, a resident individual, gifts Rs 10 lakh to his wife, who invests it in a fixed deposit and earns Rs 80,000 interest in the year. Under the clubbing provisions, what is the treatment of this interest?

The Rs 80,000 interest is clubbed with Ramesh's income. Income from assets transferred to a spouse without adequate consideration is taxed in the transferor's hands, even though the gift itself is not taxable.

  1. ATaxed in the wife's hands since she owns the deposit
  2. BTaxed in the hands of Ramesh, as income from assets transferred to the spouse without adequate considerationCorrect
  3. CSplit equally between Ramesh and his wife
  4. DExempt, because gifts between spouses are exempt

Explanation

Income arising from assets transferred by an individual to his spouse without adequate consideration is clubbed with the transferor's income. The gift itself is exempt, but the interest of Rs 80,000 is added to Ramesh's income. It is not split between the two.

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