Top News

Income Tax Notice Rules: Money transactions between husband and wife are common, but it is important to keep in mind the income tax rules. There is no direct restriction, yet ignoring the rules can lead to an income tax notice. While making cash transactions for household expenses, gifts, or other needs, you have to understand some circumstances and rules so that there is no problem in the future.

If you are unaware of these rules, then you may not only have to face financial problems, but you can also unknowingly come under the purview of tax evasion. Today we will tell you about these rules in detail so that you can avoid any kind of trouble in the future.

According to the Indian Income Tax Act, if the husband gives money to his wife for household expenses or as a gift, then this amount is considered as the income of the husband, and no tax is levied on the wife. However, it is necessary to follow sections 269SS and 269T in such transactions.

Cash transactions between husband and wife and tax rules - what does the law say?

Matter of investment and income from it: The real problem arises when the wife repeatedly invests the money received from the husband in some place (such as fixed deposit, shares, mutual funds, etc.) and she gets any income from that investment.

No tax on household expenses or gifts: If a husband gives cash to his wife, whether it is for daily household expenses or as a gift on a special occasion, then there is no direct income tax notice on it. According to the law, this amount is considered a part of the husband's income, and the wife does not have any tax responsibility for this amount.

Wife's tax liability: In such a situation, the wife may have to pay tax on the income from that investment, if her total income falls in the taxable slab. The wife will have to show this income in her Income Tax Return (ITR).

Risk of clubbing of income: In some cases, if it is proved that the main purpose of the investment was to save tax or divert income, then the Income Tax Department can add this income of the wife to the total income of the husband under the provisions of "clubbing of income". This can increase the tax liability of the husband. Therefore, it is very important to know what is the end use of the money.

These two important rules of income tax on cash transactions - Section 269SS and 269T-
Two sections in the Income Tax Act regulate large cash transactions so that black money can be stopped and transparency is maintained in the transaction. These are Section 269SS and 269T.

1. Section 269SS- Limit on taking cash: According to this section, no person can accept cash of ₹ 20,000 or more from another person at one time or in total as any kind of loan, deposit, or any other specified transaction. If a transaction of more than ₹ 20,000 is to be done, then it should be done only through banking channels (such as account payee cheque, account payee bank draft, NEFT, RTGS, or other electronic means).

2. Section 269T- Limit on returning cash: Similarly, this section prohibits returning a loan or deposit of ₹ 20,000 or more in cash. That is, if you have borrowed ₹ 20,000 or more from someone, then you cannot return it in cash, you have to return it only through banking means.

3. Special exemption in case of husband and wife: The good thing is that due to the close relationship between husband and wife, usually there is no penalty for violation of these sections if the transaction is genuine and bona fide. But, this does not mean that these rules should be completely ignored. Large cash transactions should always be avoided and it is better to use banking channels to maintain transparency.

RBI's big decision will no longer print these 2 notes

How much cash can one give to the wife? Is there any limit?

It is a common question of how much cash can a husband give to his wife.

1. No limit for household expenses: If the husband gives money to his wife for general household expenses (such as ration, bills, children's fees, etc.), then there is no upper limit. This amount is considered a part of the husband's income and the wife does not have to pay any tax on it.

2. Keep an eye on the money given for investment: If the money given to the wife is used by her for any investment (such as fixed deposit, stock market, mutual fund, gold, or property purchase), then the income from that investment may be taxable.

3. Example: Suppose the husband gave Rs 5 lakh to the wife, which the wife invested in a fixed deposit and got an annual interest of ₹ 30,000. This income of ₹ 30,000 will be considered as the wife's and if her total income is more than the taxable limit, then she will have to pay tax on it. In certain circumstances, as mentioned earlier, it can also be clubbed with the husband's income.

It is important to take these precautions in cash transactions.

While making cash transactions between husband and wife, some other things should be kept in mind.

1. Rental income: If the money given to the wife is used to purchase a property that is given on rent and generates rent, then this rent will be considered as the income of the wife and she will have to pay tax on it in her ITR.

2. Gift Tax Rules: There is no gift tax on any amount or property gifted by the husband to the wife because the husband and wife fall under the category of 'close relatives' under the Income Tax Act. But if the amount gifted is very large and its source is not clear, then the Income Tax Department can question it.

How to avoid income tax notices?

You can avoid the hassle of income tax notices by adopting some simple measures.

Avoid cash transactions of more than ₹ 20,000-

Try not to make cash transactions of more than ₹ 20,000 at a time, especially in the form of loans or advances.

Use banking channels-
Always use cheques, NEFT, RTGS, UPI, or other digital banking mediums for large amounts. This keeps a record of the transaction.

Give correct information in ITR-
If the wife invests the money received from the husband and earns income from it, then enter the information of that income correctly in your income tax return.

Tax on income from property-
If the wife has bought any property (such as property with, a fixed deposit) with the money received from the husband, then ensure timely payment of tax on the income from it.

Keep all documents safe-
Keep all documents related to any major transaction or investment such as bank statements, gift deeds (if any), purchase bills etc. safe.

When can the income tax notice come?
The Income Tax Department can issue a notice when it suspects that the husband has used the amount given to the wife only to save tax or to show less income. The investments made by the wife or the income from them have not been disclosed correctly in the ITR. There have been very large cash transactions for which there is no satisfactory explanation. Any discrepancy is found based on the information received from a third party (such as a bank).

Disclaimer: This content has been sourced and edited from TV9. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.