I work right now in a private company and am in the 30 per cent tax bracket. Due to this, my interest and dividend income/investment income also is getting taxed in higher tax bracket. Can I transfer all my debt and equity investment in my mother’s name so that I can save the tax in income earned by investment? Can I do so in the name of my wife also? How much money can I transfer to my mother every year in her account?

Sandeep

It is being assumed that the transfer will be an irrevocable transfer whether the same is to your mother or wife. It will, therefore, be a gift and you will not be paid any consideration for the transfer of your investments.

In response to your query, as per the provisions of Section 64 of the Income-Tax Act, 1961 (the ‘Act’), in case the said debt and equity investments are transferred to your spouse without adequate consideration, any income arising from the same shall be clubbed with your income. The income earned from the investments made by your wife (from the income earned and already taxed in your hands) will be taken as income of your wife. This income will not be clubbed again in your hands.  

In contrast to the above, the income arising from such assets in the hands of your mother shall not bear any income-tax implications and also, the income from such investments shall not be clubbed in your income provided the relevant asset is transferred in her name.

Further, there is no capping on the amount of money you can transfer to your mother or wife under the Act.

The author is a practising chartered accountant

Send your queries to taxtalk@thehindu.co.in

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