Individuals have to pay their share of income tax on the income or profits earned by them. The tax is paid on the taxable income, as governed by the Income tax department. In an attempt to get more disposable income, individuals follow certain tricks to skip the large amount of taxes.
Normally, an individual is taxed on the income earned by him only. However, in certain special cases income of the other person is included (i.e. clubbed) in the taxable income of the taxpayer. In such a case, he will be liable to pay tax in respect of his income (if any) as well as income of other person too.
“The situation in which income of other person is included in the income of the taxpayer is called as clubbing of income. E.g., Income of a minor child is clubbed with the income of his/her parent. Section 60 to 64 contains various provisions relating to clubbing of income,” says the FAQ section of the Income Tax Department.
How Your Wife Can Help You Save Income Tax?
Gift For Wife-to Be: If a person gifts some sort of property or any other thing to his wife-to be, it will not come under the clubbing rule, specified above. An individual can save tax with this method.
Saving From What You Offer: If you give money to your wife for expenses, and she makes savings from that, it will not be considered taxable income.
Health Insurance Saving: Under Section 80D of the Income Tax Act, an individual can get a tax deduction of up to Rs 25,000 each year for health insurance premiums.
Loan To Wife: An individual can transfer money to his wife’s account as a loan to save on taxes, but this should be done legally and not with the aim to evade taxes.
Home On Wife’s Name: If the house is in a wife’s name, a person can pay rent to her, which can help reduce his tax liability by claiming a deduction under House Rent Allowance (HRA).
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