Taxation: Homi Mistry

I retired last year. However, I am working as a consultant with the same company. If I gift a part of the gratuity money that I received to my wife (a homemaker) and she deposits it in a bank’s fixed deposit, will the tax liability reduce? She earns an annual income from the house rent that I pay her (as we are staying in a house owned by her). Another option is to gift the money to my son (major) who is a student. He is not likely to work for the next two-three years.
A gift to the spouse or children will not be considered as income in the hands of the recipient. However, the income earned thereof may attract the clubbing provisions. According to provisions for clubbing of income under the tax laws with respect to the gifts made to your spouse, the income earned on such assets will continue to be taxed in your hands. If you want to gift your spouse, she should invest it in assets yielding tax-free income, so that no taxable income is added to your income. However, the provision related to the clubbing of income will not apply in case of income earned by your son out of such a gift. It would be taxable in the hands of your son. Since your son is not likely to be working for the next two-three years, there will not be any income-tax liability assuming that the total income earned by him will be below the taxable limit, which is Rs 1.6 lakh at present.

I bought a house in June, 2008. Since it was under construction, I was unable to get tax benefits on the interest paid to the bank. Last August, the house was completed. How much interest deduction can I now claim?
The quantum of interest that can be claimed in the tax year 2010-11 is as under: a) Interest pertaining to the period April 2010 to March 2011 b) One-fifth of the interest paid till March 31, 2010. The balance interest can be claimed in equal instalments in the immediate four succeeding tax years. However, the total interest that can be claimed under (a) & (b) will be restricted to Rs 1.5 lakh per annum in the case of a self-occupied property. There is no cap provided for claiming deduction of interest in the case of let-out property.

The writer is a tax partner at Deloitte, Haskins & Sells. Views expressed are his own. Send your queries to yourmoney@bsmail.in