Transferring funds to your wife’s account can be a tax-saving strategy, as it allows her to receive an income tax exemption of up to ₹10,000 on the interest earned from savings accounts.
This method falls under the ‘clubbing provision’, which states that if you put money into her account and any income results from it (like interest, rent, or dividends), that income is included in your overall income and taxed accordingly. If you give any money to your wife, it is not subject to gift tax but the earnings from it can be included in your income according to the clubbing provision.
Investing in her name through options like fixed deposits, mutual funds, or PPF can also help reduce tax on earnings.
If your home is registered in your wife’s name, you can benefit from HRA by renting it from her, lowering your taxable income and allowing you to claim tax exemption. By transferring money into your wife’s savings account, you can reduce tax on the interest it generates and potentially receive an income tax exemption of up to ₹10,000 on the interest earned from savings accounts.
