I work in a private company and am the sole breadwinner of the family. My wife, aged 35, is a home maker. My father-in-law gifted my wife ₹30 lakh. With this amount, she plans to buy a flat in her name. If this flat is rented out, can my wife show this rental income as her income or should this rental income be clubbed along with my income?

Sivakumar

As per the provisions of Income Tax law, where any sum of money the aggregate value of which exceeds ₹50,000 is received without consideration by an individual in any year from any person, the whole value of such sum shall be chargeable to tax under the head “Income from other sources.” The gift so received is not taxed in certain cases, e.g. if any sum of money is received from any relative as defined in the relevant provision.

Accordingly, any sum of money received from a relative (including father, brother, spouse, etc.) as gift is exempt from tax. In the present facts, the sum gifted to your wife by her father shall be tax exempt in her hands. There is no limit on the amount which can be given as a gift by them.

As per the clubbing provisions of Indian tax law, the total income of any individual shall include all such income as arises directly or indirectly to the spouse of such individual from assets transferred directly or indirectly to the spouse by such individual otherwise than for adequate consideration or in connection with an agreement to live apart. Had this money been given by you to your wife, then income earned by investing such sum would be clubbed in your income.

However, money has been gifted to your wife by her father and any income earned by investing that sum will be taxed in your wife’s hands only and clubbing provisions shall not apply.

My query is very simple. If a life insurance company has deducted TDs on the maturity payment, will it be taxable in the hands of the policy holder, even if the premiums paid are higher than the maturity payment received?

Jagdish Manghnani

As per Income Tax law, any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy, is exempt in the hands of the asseessee subject to certain conditions. However, such exemption is not applicable in the following cases:

Any sum received under an insurance policy issued on or after April 1, 2003, but on or before March 31, 2012, in respect of which the premium payable for any of the years during the term of the policy exceeds 20 per cent of the actual capital sum assured; Any sum received under an insurance policy issued on or after April 1, 2012, in respect of which the premium payable for any of the years during the term of the policy exceeds 10 per cent of the actual capital sum assured.

The above provisions do not apply to any sum received on the death of a person.

It may be noted that the person receiving any sum under an insurance policy after deduction of tax at source will be entitled to claim the credit of the tax deducted at source at the rate of 2 per cent by the insurance company while offering the said sum to tax in his/her income tax return.

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