Transferring to wife’s account = Tax savings or trap? The taxman may still bill you

“Can I transfer money to my non-earning wife’s account and save tax?” — This is one of the most common questions financial planners and tax experts get. On the surface, it feels like a clever hack: move income to the spouse’s account, invest in her name, and enjoy tax-free gains. But as fintech startup AssetYogi explained in a YouTube video, the Income Tax Department already knows this “shortcut” — and that’s where clubbing provisions come in.

One should note: Under the old tax regime for FY 2024-25, a housewife below 60 years with income under Rs 2.5 lakh will not have any tax liability. For senior citizens (60 years and above), the exemption limit is Rs 3 lakh, while for super senior citizens (80 years and above), it is Rs 5 lakh.

In the new tax regime, the basic exemption limit is uniform at Rs 3 lakh for all taxpayers, irrespective of age. A housewife will only be liable to pay income tax if her total income from all sources exceeds the respective exemption threshold.

How clubbing rules work

Money or assets gifted to your spouse are tax-free in her hands. However, any income generated from those gifts — say, interest from an FD, mutual fund gains, or rental income — is not considered your wife’s income. Instead, it gets “clubbed” back into your taxable income, and you pay the tax.

So, the Rs 10 lakh you transfer to her account is a gift, yes. But the Rs 50,000 she earns as interest on it? That’s taxed as your income, not hers.

Why? Because she didn’t apply her own skill or effort to generate that income — it simply came from your transfer.

Exceptional cases

There are a few genuine exceptions where tax treatment is different:

Professional Skills: If your wife has a professional qualification and you hire her in your business, you can pay her a salary. This works only if she is actually performing services and you maintain proper documentation. Without proof of work, the taxman won’t accept it.

Pin Money: Historically, husbands gave wives household budgets. If a wife managed to save a portion of that — say ₹5,000 from a ₹50,000 monthly allowance — those savings are considered her personal “pin money.” Courts have ruled that any income generated from pin money is the wife’s own and not clubbed with the husband’s income.

Stree Dhan: Gifts received by women from parents, siblings, or relatives — at marriage or otherwise — are considered Stree Dhan. Any returns on these assets belong to the wife and aren’t clubbed with the husband’s income. However, if the husband gifts assets, income from them will still be clubbed back.

Loans to wife

Some people think, “I’ll give money as a loan, not a gift.” This can work — but only if it’s genuine. For instance, lending money for a small business, charging a nominal interest, and keeping proper records. But if you give an interest-free “loan” just for her to invest in shares, the tax officer will likely reject it.

Joint accounts

Another common question: “If my salary is credited into a joint account, can the income be split between us?” The answer is no. Taxation is based on the source of income, not where it’s parked. If you earn it, you pay tax on all of it.

When both spouses earn

If both husband and wife are earning, things are more straightforward. Each can claim deductions separately under sections like 80C (investments), 80D (health insurance), and home loan interest (old regime). Under the new regime, deductions are fewer, but higher slabs reduce tax liability for many families.

Transferring money to a spouse’s account isn’t a tax-saving trick — it often backfires due to clubbing rules. Real savings come from legit salary arrangements, pin money, Stree Dhan, or both spouses earning independently.

In other words, your wife’s account can be a smart tax tool — but only if you play by the rules. Otherwise, it’s more trap than treasure.

In general, housewives are not liable to pay taxes as they usually do not have direct income. However, if income from other sources crosses the basic exemption limit, it becomes taxable.

The ITR form for housewives is the same as that for salaried taxpayers. Even in the absence of income, filing an ITR can be beneficial for purposes such as joint loan applications, serving as valid address proof, and maintaining a financial record.