Readers' Corner: Life Insurance

Kuldip Kumar, Executive Director - Tax & regulatory Practice, PwC answers your questions

I am a homemaker and have no income of my own. My husband transfers money into my savings bank account, which I use for routine household expenses. Will I have to pay tax on this?

There is no tax on transfer of money by your husband to meet the household expenses. The Income Tax Act, 1961, contains the concept of 'clubbing of income' in the hands of the transferor where income is earned from an asset transferred by an individual to the spouse without an adequate consideration. In other words, if the husband transfers money to his wife and she earns interest thereon, the interest income so earned by wife will be clubbed in her husband's total income for the relevant year. However, the above rule may not be applicable in respect of income earned by the wife from 'pin money' (a reasonable allowance given to her by her husband for her dress and usual day-to-day household expenses) received from her husband. Courts in India have held that the clubbing provisions of the Act will not apply where an asset is acquired by the wife out of savings from pin money.

You have mentioned that you're not having any income and savings bank interest may not be exceeding the basic threshold taxable income of Rs 2.5 lakh. Therefore, in your case, there should not be any tax liability for you.

My PPF account will mature this year. If I extend it and continue to invest, will I still get any tax exemption? Can I extend it for 15 years?

The PPF account can be extended up to five years only at a time. This means, you can extend your PPF account for 15 years. However, the same can be done by extending it three times, each time for five years. Once the account is extended and contribution is made towards it, you will continue to get tax exemption in respect of interest earned and any withdrawal from the fund.

The views expressed are expert's own. Send your queries to yourmoney@bsmail.in