By Admin 
Tax Rules: It is common to gift money or shares between husband and wife. Many people transfer shares to their life partner considering tax planning or investment. But before doing this, it is very important to understand the rules of income tax. Because in many cases there is no tax on gifting shares, but tax may have to be paid on the income earned from it.
Is there tax on gifting shares?
If a husband gifts shares to his wife or a wife to her husband, then no tax is levied at the time of share transfer. According to Income Tax law, gifts given between husband and wife are considered tax-free. However, this does not mean that the entire future income will also be free from tax.
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Clubbing rules apply to earnings
If dividends are received from shares received as gifts or capital gains are made on selling them, then in many cases the clubbing provisions of the Income Tax Act may apply. This means that the income from gifted shares can be added to the income of the person who gifted the shares. This means that the responsibility of tax may fall on the person giving the gift. For example, if the husband gifts shares to his wife and there is income from those shares, then that income can be added to the taxable income of the husband.
What things should be kept in mind while filling ITR?
If you have gifted shares to your spouse, it is important to keep some things in mind while filing ITR.
- Keep records of share gifts
- Get a Gift Deed made
- Keep track of capital gains on selling shares
- Check Clubbing Rules
- Talk to a tax expert
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Will the profits made later also go to the club?
Clubbing rules do not always apply if the first income from gifted shares is invested to generate further new income. This means that tax on subsequent income may be determined differently.
hurry to save tax
Many people transfer shares to their partner just to save tax. But doing this without understanding the rules can lead to tax notice or extra tax later. Therefore, before making any big investment or transfer, the tax rules should be understood thoroughly.