income-tax-clubbing-provision

Question Bankincome-tax-clubbing-provision
kishor asked 1 year ago

Dear sir,. 1.If I contribute from my income to a wife\’s ppf account regularly & claim the 80C rebate in my return. Now when this PPF account in the name of wife matures/closed the sum received will be my Capital OR her capital? Can she further invest this money & earn from it without attracting clubbing provision to me. 2. If wife saves a little out of the money given to her for household expenses, that money is her own. And she can invest it without attracting clubbing provision to me. What is thumb rule for a reasonable amount for a year for such amount

2 Answers
Rahul answered 1 year ago

Dear kishor,

  1. As per provision of section 80C, contribution to PPF account in the name of spouse is eligible for deduction under section 80C.However clubbing provision will apply but Interest earned in PPF account and sum received on maturity along with interest is exempt u/s 10. Hence clubbing provision are not going to increase your tax liability. But after maturity of PPF account, if this sum is further invested by your wife, then clubbing provision will apply only on income earned on  principal amount of PPF. Clubbing provision will not apply on income earned on interest part. Becasue Income earned from the income earned is not clubbed!
  2. If a wife saves a little out of the money given to her for household expenses, that money is her own. If it is invested, the gains will not be clubbed with the income of the husband. No limit of such amount is provided in law but it depends on your financial status.

 

Aman answered 1 year ago

Dear Kishor,
As per sec 80C, you can claim deduction under this section for contribution made by you in PPF account of your spouse. Interest earned annually and the corpus received along with interest on maturity is exempt under section 10. Hence clubbing provision are not going to increase your tax liability. This sum received on maturity is part of capital of your spouse. After maturity if she reinvest the corpus to received to earn more income, clubbing provision will apply only for income earned on principal part. No clubbing will apply for income earned on interest part. Because as per clubbing provision, Income earned from the income earned is not clubbed!
2)_If a wife saves a little out of the money given to her for household expenses, that money is her own. If it is invested, the gains will not be clubbed with the income of the husband. There is no limit provided in law w.r.t this amount. But it depends on your financial status.

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