Sec 44ada query

Question BankCategory: Income TaxSec 44ada query
Kollipara sundaraiah asked 1 year ago

I.t.assess source of income professional income sec 44ada I.t. return filer details mentioned below in f.y 19-20.
1.gross receipts rs:12 lacs net profit declare 50%rs:6 lacs . gift to wife Rs:3 lacs payment through on bank mode.
Net profit as per profession Rs:6 lacs
Assess cash gift to wife Rs:3 lacs sec 64 applicable as per I.t act.
Assess total taxable income Rs:6 lacs ( net profit for professional services)or (professional net profit Rs:6 lacs + cash gift transaction Rs:3 lacs) rs:9 lacs show profit I.t. return in f.y.19-20.
Assess above gift transaction treatment in books.

1 Answers
Rabindra answered 1 year ago

Basically your question is about treatment of Gift to wife in income tax. 
This can be explained with the help of following example..
Mr. A transferred an amount of Rs. 50 Lakh to his wife as gift..
In this case, this sum of Rs. 50 is given from income of Mr. A which is already taxed in his hands. 
Now this sum of Rs. 50 Lakh received by wife is not taxable in the hands of wife and gift from relative is exempt. 
But any income earned by wife of Mr. A from investing this 50 Lakh will be clubbed in the hands of Mr. A. because this money was given by Mr. A to his wife without any consideration. 
Hence gift given will not be clubbed and gift value is not taxable in the hands of gift giver or gift receiver.
But income earned by wife by investing the money received as gift from husband will be clubbed with the income of husband and it is taxable in the hands of husband. 
In your question , you wrongly added 3 lakh to income of assessee….Rs. 3 lakh is already taxed…Hence if any income earned by wife by investing these 3 Lakh then that income will be clubbed with 6 Lakh.
Clubbing of income is treatment provided to arrive at taxable income of assesee. No accounting entry required in the books of husband for clubbing if income is retained by wife. But following entry is done for gift give to wife…
Gift to wife A/c dr.
To Bank.

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