Invest through a non- working spouse

Topic:Invest through a non-working spouse

If you gift money to your non working spouse , there is no tax implication. However, if this money is invested, the assessment officer  will club the income from the investments with your income.

Is there then, a point of investing the money in your spouse’s name? Yes there is .  The clubbing happens only to the first level of income.

If this first level of income is reinvested and earns an income, it will be belong to your spouse and taxed accordingly.

This is how you could make it work:-

  • Gift money to your spouse and invest in any tax – free investment option ( currently equity MFs, tax free bonds etc)
  • The earnings will get clubbed to your income , but since they are tax free, it will not increase your tax liability.
  • She can reinvest these earnings and the income thus earned is taxed in her hands( at no or lesser tax rates).

But  it is better you invest in your spouse’s name by documenting it as a gift through a gift deed. Its not complicated to
get this done. You could do it on a Rs 100/- stamp paper and is not required to be registered.


Author : Shantala Kumble ( Vice President International Money Matters Pvt Ltd) 


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