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CS Executive · Tax Laws and Practice · Clubbing Provisions and Set Off and Carry Forward of Losses

Under the clubbing provisions of income tax (Income-tax Act, 2025, applicable from June 2027), Ravi gifts Rs 5,00,000 in cash to his wife Meera, who invests it in a fixed deposit with a bank. The interest on the FD is Rs 40,000. In whose hands is this interest taxable, assuming no other facts?

The interest of Rs 40,000 is taxable in Ravi's hands. When an individual transfers money to a spouse without adequate consideration, income arising from that asset is clubbed with the transferor's income. The gift is exempt, but the income it generates is not.

  1. AMeera, because the deposit is in her name
  2. BRavi, because the income arises from assets transferred to the spouse without adequate considerationCorrect
  3. CSplit equally between Ravi and Meera
  4. DNot taxable, since gifts between spouses are exempt

Explanation

Where an individual transfers an asset to his or her spouse without adequate consideration (other than in connection with an agreement to live apart), income from that asset is clubbed with the transferor's income. The gift itself is exempt, but the income from the gifted money is clubbed with Ravi. Meera's name on the FD does not change this.

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