As per section 64(1)(iv), if an individual transfers (directly or indirectly) his/her asset (other than house property) to his or her spouse otherwise than for adequate consideration, then income from such asset will be clubbed with the income of the individual (i.e., transferor).
Situation:
Husband gifts money (asset) ? wife invests in mutual fund units.
Wife earns capital gains (short-term or long-term) on redemption/sale of units.
Will such capital gains be clubbed with the husband’s income under Section 64(1)(iv) of the Income-tax Act, or will it be taxable in the wife’s hands?
Income from mutual fund units gifted to spouse is clubbed with transferor under section 64(1)(iv); exceptions if consideration applies If the transferor gave the money to the spouse as a gift without adequate consideration and the spouse used that money to acquire mutual fund units, income on sale/redemption of those units will be clubbed with the transferor's income under section 64(1)(iv). If the transfer was for adequate consideration or falls within any statutory exception, the capital gains will be taxable in the spouse's hands. The critical facts are the nature of the original transfer (gift vs. consideration) and whether any specific exception applies. (AI Summary)
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