Transferring money to your wife is completely legal and tax-free, but experts caution that it rarely leads to real tax savings due to India’s clubbing provisions. Under Section 56(2)(x) of the Income-tax Act, gifts from a spouse are exempt without any upper limit, meaning depositing money into your wife’s account doesn’t attract tax at the time of transfer.
However, Section 64(1)(iv) ensures that any income earned from that gifted amount is taxed back in the hands of the person who made the gift. For example, if you gift ₹10 lakh to your wife and she invests it in a fixed deposit, the interest she earns—say ₹1 lakh—will be added to your taxable income. The same applies to dividends, capital gains, or returns from any investment made using the gifted money. Even future gains from reinvestments are clubbed back to the original taxpayer.
Experts note that gifting can still be useful if the spouse later earns independent income or invests in tax-exempt avenues like PPF. Proper documentation, gift deeds for large amounts, and structured financial planning remain essential. Ultimately, while gifting is legitimate, it does not automatically reduce tax burden unless part of a broader tax-efficient strategy.
