Gifts received from spouse are not treated as income under income tax laws

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Question: My wife is a housewife. Can I offer him Rs 10 lakh to invest in tax free bonds? As interest earned on tax-exempt bonds is not taxed, I would like to know if it will still be clubbed with my income.

Answer: In accordance with income tax laws, donations received by a person are treated as income if the total amount of all donations he received from all sources during the year exceeds Rs 50,000. Then , he is liable to pay tax on it. That said, gifts received from certain specified relatives (which also include the spouse) are not covered by this provision and therefore such gifts are not treated as income by the recipient. Therefore, the amount offered by you will not be taxed in his hands.

However, any income earned on gifts so made by a spouse must be associated with the income of the spouse making the gift. Therefore, the interest of the amount invested by your wife in the bonds will still have to be clubbed in your hands, but it will also be exempt in your hands. If your wife invests the interest so received on these tax-exempt bonds to earn other income, then such income generated on the investment of the interest income already clubbed will not be clubbed in your hands and will be taxable in the hands of your woman.

Please note that the clubbing provisions will apply until the marriage subsists, so as she invests the proceeds from the redemption of these bonds, the income earned on these new investments will need to be associated with your income.

Question: Our HUF consisted of my father, who was the karta, my mother, my married older sister and myself. My father is dead. What is the status of the HUF? In what proportion should all co-owners get the assets? How will the provisions apply if my father has made a will?

Answer: The death of a karta does not automatically disband the HUF. It is not necessary for you to distribute HUF assets. The HUF continues to exist even after the death of the karta; the senior coparcener becomes the karta of the HUF. Thus, your married older sister will become a HUF karta. If all HUF members agree, you can also become the karta.

As for the implications of your father making a will, in addition to his self-acquired assets, a person can only bequeath his share of HUF assets as he wishes. Note that a co-owner only has the right to bequeath his share of the HUF assets and not all of the HUF assets. So, if your father has drawn up a will specifying how his share of the HUF assets is to be distributed, his share of the HUF assets will be distributed according to his will.

However, in the event that a copartition dies without making a will or bequeathing their share in the assets of HUF, a division of HUF is deemed to have occurred immediately prior to the death of the copartition, and their share passes to their legal heirs. under the provisions of the Hindu Succession Act 1956. So, if your father did not make a will regarding his share of the HUF assets, it is extracted from the HUF and is inherited by you, your mother, and your sister as well. Even after carving that out, you can continue with the HUF with an increased share of HUF assets.

This distribution of your father’s share of HUF assets is treated as a partial distribution under income tax laws, which is not recognized by income tax laws. Accordingly, income relating to the stripped portion of HUF’s assets will continue to be taxed in the hands of HUF. The other co-owners remain HUF members. However, if you want to fully share the HUF after he dies, you, your sister, and your mother will each receive an equal share of the HUF assets.

The author is a tax and investment expert.

(Disclaimer: Opinions expressed are those of the author and Outlook money does not necessarily subscribe to it. Outlook money will not be responsible for any damage caused to any person/organization directly or indirectly.)

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