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My husband, a pensioner, is not in a position to operate his bank accounts as he is bedridden. He gave his retirement benefit funds to me. Using this amount, I opened an FD account in my name. Who is to pay tax on the interest income for this FD?
- Sathi
As per Section 64 of the Income-Tax Act, 1961 (the Act), any transfer of an asset to a spouse without adequate consideration attracts clubbing provisions and accordingly, the income arising to the spouse out of the asset transferred is taxable in the hands of the spouse who transferred the asset. Thus, the interest income that you earn on the FD would be taxed in the hands of your husband. However, if you re-invest the interest income from the FD in any other income-bearing instrument and earn income from the same, the second generation of income would be taxable in your hands and shall not be clubbed with your husband’s income.
(The writer is a practising chartered accountant. Send your queries to >taxtalk@thehindu.co.in)
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