SIP: If a housewife wife is running an SIP, who will pay the taxes? Learn about the clear income tax rules..

In today's digital age, the practice of giving cash for household expenses has rapidly declined. Now, most people send money to their wives' accounts every month via UPI or bank transfer, especially when the wife is a homemaker and manages the entire household budget. But if the wife is investing the money received in an SIP or elsewhere, who will pay the tax on that income? Many people may be unaware of this rule; here's what you need to know. Learn when the tax liability falls on the husband, when the wife might have to pay tax, and what important points to keep in mind.

Is giving money to your wife for household expenses tax-free?

If you give your wife money for household expenses, personal needs, or daily expenses, this amount is not taxable. This money falls under the category of gifts or household expenses. Whether you give cash or transfer it via bank, as long as it is used for expenses, it is not considered taxable income by the Income Tax Department.

When does the income tax liability fall on the husband?

If the wife invests the money given to her in an SIP, mutual funds, fixed deposits, or any other savings scheme, the initial income generated from that investment will be considered the husband's income. This is called "Clubbing of Income" in income tax terminology. In this situation, the husband will have to pay the tax. The wife is not required to file an ITR.

When will the wife have to pay the tax herself?
Now comes the real twist. If the wife reinvests the income earned from the initial investment, the income generated from that second investment will be considered the wife's own income. In simple terms, the income earned from reinvesting the initial earnings will be added to the wife's income on a year-on-year basis. If income tax is applicable based on the tax slab, the wife will have to pay it, and filing an ITR will be mandatory.

Why does filing an ITR become necessary? Even if the wife is a housewife, if her income exceeds the taxable limit, filing an ITR is mandatory; otherwise, there is a risk of penalties and notices. Therefore, it is crucial to maintain accurate records of all income earned from investments.

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