Tax on FD interest for homemaker wife from money transferred by salaried husband

Chairman 16
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Case : Husband is a salaried person with TDS and wife is homemaker (no employment). Husband's salary (after TDS) gets credited monthly to a joint (Husband + Wife) savings bank account, say. AC-1.

Husband then transfers some amount (say 5 lac) to another single savings bank account of wife, say AC-2.

Wife makes a FD of that amount (5 lac) from AC-2.

Questions :

(a) Is interest on that FD (5 lac) taxable?

(b) If yes, how much is the tax implication ? Is there a way to save this tax?

(c) Will filling form 15G for this FD save tax on the interest ?

gift-to-wife fixed-deposit bank-interest income-tax
1 Answers

Normally interest would be taxable to husband in this case as the original money is provided by him only.

But if the amount is given to wife as gift (a gift deed can be done on plain paper), then interest would be taxable to wife on earnings from these investments.

In case your wife does not have other income, her total income from the fixed deposit interest would be less than exempted range and thus no tax would be payable.

Wife should submit form 15G to avoid tax deduction on bank interest. Otherwise bank would deduct 10% TDS on interest.

Pankaj Batra5212

Thank you Pankaj. Few follow-up clarifications requested : (1) Is it mandatory to make a gift deed for transferring money from husband to wife, even if the amount gets transferred (via NEFT) from the joint savings account to the sole savings account of the wife? (2) Where can I get a sample OR contents of such a gift deed? (3) In case of gift deed, it there a defined mode of transfer from husband to wife, or any means is acceptable viz. online NEFT transfer, cheque, cash?

Chairman•
  1. Gift deed is just a proof that amount is given as a gift and amount is not expected back.
  2. There is no as such specific format for such deed. see a below sample for same.
  3. Any mode is acceptable NEFT/Cheque or Cash.

Gift Of Money To Wife

LET IT BE KNOWN TO ALL by this Deed of Gift that I, …………….. S/o…………… R/o……………….. do, hereby, out of natural love and affection and also out of my free will and without any force, compulsion or undue influence, transfer an amount of Rs………….. to my wife Mrs……….. X ……… D/o……….. R/o…………….

IN WITNESS WHEREOF, I have signed this deed of gift on ……………………. In presence of

Witnesses: Sd/-Donor……….

1……………..

2………………..

Pankaj Batra•

I was looking for such a "Gift Deed Format", just clear one thing, Can this format be used for all such gift deeds, i.e. Gift to Brother-in-law & for Mother & Father?

VIKAS SINGHAL•
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