TDS Deducted In Wife’s Name? Here’s How Husband Can Claim Credit In His ITR

Transferring money to a spouse for investment does not necessarily shift the tax liability. If a husband gives money to his wife without adequate consideration and she uses it to earn interest, rent or capital gains, the income may be clubbed with the husband’s total income under Section 64 of the Income-tax Act, 1961.

This can create a mismatch at the time of filing the income tax return. The investment and the tax deducted at source (TDS) may appear against the wife’s PAN, while the income is required to be reported and taxed in the husband’s return.

When Clubbing Provisions Apply

Clubbing may apply when money or another asset is transferred to a spouse and income is subsequently earned from it. The rule can cover interest from fixed deposits (FDs) or savings accounts, rent, and gains from mutual funds, shares or gold, depending on the nature of the transaction, according to a recent report by CAClubIndia.

For instance, suppose a husband gives his wife Rs 10 lakh, and she places it in a fixed deposit. If the deposit earns Rs 60,000 during the year, that interest would generally be included in the husband’s taxable income because the original investment came from him.

However, the rule applies to income arising directly from the transferred asset. If the wife reinvests the Rs 60,000 interest and earns further income from that reinvestment, the subsequent income is ordinarily taxable in her hands. Her salary, professional income or returns earned from money belonging to her are also not clubbed merely because she is married.

How The Husband Can Claim TDS Credit

Where the income is taxable in the husband’s hands, the corresponding TDS credit should also be claimed by him. Depending on the nature of income, he may need to use ITR-2 or ITR-3 and disclose the amount in Schedule Performance Index (SPI), which captures income of specified persons included in the taxpayer’s total income.

In the TDS schedule, the husband should select the option indicating that the credit relates to another person. He must enter the wife’s PAN or Aadhaar details, the deductor’s Tax Deduction and Collection Account Number (TAN), the relevant TDS section, the income offered for tax and the amount of credit being claimed.

The wife should not claim the same TDS again in her return. The entries in both returns should be consistent, as duplicate claims or a mismatch between the income and TDS details may delay processing or lead to a tax notice.

Taxpayers should also review Form 26AS and the Annual Information Statement (AIS). Where appropriate, feedback may be submitted in the AIS to indicate that the information relates to another person. Records showing the transfer of funds, investment trail, income earned and TDS deduction should be retained in case the tax department seeks clarification.

FAQs

1. When is income from money transferred to a spouse clubbed? 

Income earned directly from money or assets transferred to a spouse without adequate consideration may be taxed in the transferor’s hands under Section 64. 

2. Can the husband claim TDS deducted under the wife’s PAN? 

Yes. If the related income is included in the husband’s return, he may claim the corresponding TDS credit by providing the required details in the TDS schedule. 

3. Can both spouses claim the same TDS credit? 

No. The wife should not claim the TDS if the income and credit are being reported in the husband’s return, as duplicate claims may trigger a mismatch.