Income tax notice rules: Income tax rules on cash transactions Under the Income Tax Act in India, there is no direct tax liability on cash transactions between husband and wife. If you do not understand these rules, then you may have to face financial problems.
Income tax notice rules: Cash transactions between husband and wife are common, but if it is done without thinking, then a notice can come from the Income Tax Department. Under the Income Tax Act, there is no direct restriction on cash transactions between husband and wife, but there are some rules and circumstances that are important to understand. Income tax rules on cash transactions Under the Income Tax Act in India, there is no direct tax liability on cash transactions between husband and wife. If you do not understand these rules, then you may have to face financial problems.
According to tax experts, if the husband gives money to his wife for household expenses or as a gift, then this amount will be considered as the husband’s income and the wife will not have any tax responsibility on it. According to the Indian Income Tax Act, special rules apply to transactions made between husband and wife. The husband can give money to his wife in cash or other form, but it is mandatory to follow the Income Tax rules and the provisions of Section 269SS and 269T.
1. Tax rules on giving cash to husband and wife
Household expenses or gift-
If the husband gives cash to his wife, whether it is for household expenses or as a gift, then there is no income tax notice on it. This amount is considered the income of the husband and no tax liability is imposed on the wife.
On giving cash for repeated investment
If the wife repeatedly invests this money somewhere and earns income from it, then the wife will have to pay tax on this income. In this case, the wife will have to show this income in the Income Tax Return (ITR). It can be added to the husband’s income under “clubbing of income”, which can increase the tax liability.
2. Income Tax Rules on Cash Transactions
Under the provisions of Section 269SS and 269T, certain limits are set on cash transactions between husband and wife:
Section 269SS-
Cash of more than ₹20,000 cannot be given in lump sum. If the transaction is more than ₹20,000, then it is mandatory to do it through banking medium (such as cheque, NEFT, RTGS).
Section 269T-
If cash of more than ₹20,000 has to be returned (borrowed from someone), then it can be done only through banking channel.
Special exemption-
Due to the close relationship between husband and wife, there is no penalty under these sections. However, it is important to follow these rules to maintain transparency.
3. Limit on giving cash to wife
There is no limit for household expenses. The husband can give any amount to his wife for household expenses. This amount is not taxable, and it is considered a part of the husband’s income.
For investment
If the wife uses the money given to her for any investment, such as fixed deposit, stock market, or to buy property, then tax will have to be paid on the income earned on it. Suppose the money given to the wife generates an annual income of ₹ 1,00,000, then it will be added to the husband’s income and tax will be levied.
4. Precautions in cash transactions
Rental income-
If the money given to the wife is used to buy a rental property and rent is received from it, then this rent will be considered the wife’s income and tax will have to be paid on it.
Gift tax rules-
The amount given as a gift by the husband to the wife is not taxable, because the husband and wife fall in the category of close relatives.
5. Ways to avoid tax notice
- Do not make cash transactions of more than ₹ 20,000.
- Use banking medium (cheque or NEFT/RTGS).
- Enter the information of the wife’s investment amount correctly in the tax return.
- If the wife has purchased any property (property, FD), then ensure payment of tax on its income.
6. Possibility of getting a notice
If the Income Tax Department comes to know that the husband has used the amount given to the wife to save tax or the income earned from this money has not been disclosed, then the department can issue a notice.
What are Income Tax sections 269SS and 269T?
Sections 269SS and 269T are provisions under the Indian Income Tax Act that have been made to regulate cash transactions and curb black money. The purpose of these sections is to ensure that cash transactions are transparent and tax evasion can be avoided. Under 269SS, any person or entity is prohibited from accepting an amount of ₹20,000 or more in cash as a loan, deposit, or advance payment.
What is the penalty provision?
If someone makes a transaction of more than ₹20,000 in cash and is not in a husband-wife relationship, then the tax department can charge the same amount as a penalty. If a person violates this provision, he will be fined under section 271D.
Who gets exemption?
Transactions between close relatives-
There is no penalty for cash transactions between husband and wife, parents and children, siblings, etc.
Gifts and essential expenses-
These provisions do not apply to money given as gifts, household expenses, or for other valid reasons.
Agricultural income-
These sections have no effect on income and transactions related to agriculture.
