Tax Saving Tips: There are numerous techniques to reduce taxes, but one intriguing method that many individuals do not fully comprehend is transferring funds to the wife’s account.

Transfer fund to wife’s account

This may be a smart decision, yet it is crucial to grasp its regulations. If you send money in your wife’s name and she invests it, the earnings from that can be included in your income. However, with proper planning, you can reduce taxes by utilizing the clubbing provision. Let’s examine this trick thoroughly.

Clubbing provision

The technique of avoiding tax by putting funds in a wife’s account falls under the ‘clubbing provision’. Sections 60 to 64 of the Income Tax Act state that if you put money into your wife’s account and any income results from it (like interest, rent, or dividends), that income is included in your overall income and taxed accordingly. This is referred to as ‘clubbing provision’. If you give any money to your wife, it is not subject to gift tax. Nevertheless, the earnings from this can be included in your income according to the clubbing provision.

Invest in her name through options like FDs

If your wife earns little or no income, you may invest in her name through options like fixed deposits, mutual funds, or PPF. This will lead to a reduction in tax on the earnings. If your home is registered in your wife’s name, you can benefit from HRA by renting it from her. This will lower your taxable income, allowing you to claim tax exemption. By putting money into your wife’s savings account, you can reduce tax on the interest it generates.

You can receive an income tax exemption of up to ₹10,000 on the interest earned from savings accounts. Invest in your wife’s name to ensure the income generated is taxed at a lower rate.