Income tax

Income Tax on Cash Gifts to Wife: How Much Can You Gift on Women’s Day Tax-Free?

Wife Cash Gift Tax: Experts say a cash gift of up to Rs 50,000 from anyone will have no tax implications under normal circumstances.

On this Women’s Day, how about giving a cash gift to your wife? Giving a cash gift can be a good idea because it is something useful in all circumstances. But it’s important to understand how much money you can give without any tax implications.

Experts say a cash donation of up to Rs 50,000 from anyone will have no tax implications under normal circumstances.

However, in the case of a cash gift from the husband, there is no limit on the amount of money that can be given tax-free. In other words, a man can gift any amount to his wife without any tax implications.

“Under normal circumstances, cash gifts up to Rs. 50,000 are not subject to tax in the hands of the recipient. However, this threshold does not apply in case the cash gift is received of a specified relative (which includes spouse) under Section 56(2)(x) of the Income Tax Act (“IT Act”),” said Dr Suresh Surana. Founder of RSM India, told FE Online.

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“Thus, cash gifts from a husband to his wife would be exempt from tax regardless of the amount in accordance with Section 56(2)(x) of the IT Act,” he added.

However, there is a catch!

As per tax laws, any person cannot receive more than Rs 2 lakh or more in cash from one person in a day in a single transaction. Hence, tax experts say it would be advisable to limit your cash donation to Rs 2 lakh.

“Section 269ST prohibits any person from receiving an amount of Rs. 2 lakhs or more in aggregate from any person in a day or in respect of a single transaction or in respect of transactions relating to an event or an occasion of a person, etc. Thus, it is advised that such cash gifts should be limited to less than Rs. 2 lakhs,” Dr. Surana said.

Tax on income from cash donations

Even though the cash gift will be tax-free in the hands of the wife in our case, any income from such an investment of such amount would be taxable in the hands of the husbands.

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“It is pertinent to note that although the cash gift is tax-exempt in the hands of the wife, any accrued income on that cash gift amount would be subject to the clubbing provisions u/s 64(1) ( iv) computer law and hence imposed in the hands of the husband,” Dr. Surana said.

“Thus, the amount of clubbing should be factored into tax planning before making such a cash gift to the wife,” he added.