Income Tax: You can save a lot of tax by giving a loan to your wife instead of a gift, know how

Income Tax: People with high income can make huge tax savings by using some income tax rules. Many people gift a large amount to their wife because gifts are not taxed. But, if any income is generated from the gift amount, it is added to the income of the person giving the gift and is taxed.

People who earn more have to pay a lot of tax. Therefore, they have to be careful in financial transactions. If your income also falls in the highest tax slab, then it is important for you to know some special rules of income tax. This can help a lot in tax-savings. For example, if you give a loan to your wife instead of a gift, then you can save a lot of tax.

Tax rates on high income

First of all, it is important to know how much income falls in the highest tax slab. If you use the old regime of Income Tax and your annual income is more than Rs 10 lakh, then you will have to pay 30 percent tax. In the new regime, 30 percent tax is levied on income more than Rs 24 lakh annually. This means that the tax rates are higher in the old regime. But, it has to be kept in mind that the benefit of deduction is available in the old regime. The benefit of deduction is not available in the new regime.

Wife can be given a gift or loan

Suppose your annual income is Rs 30,00,000. This means that you fall in the highest tax bracket. Your wife needs Rs 30,00,000 to open a shop. You want to give this money to your wife. There are two ways of doing this. You can give this money to your wife as a gift. In the second way, you can give this money to your wife as a loan. From a tax point of view, giving this money to your wife as a loan can lead to a lot of tax savings.

There are different tax rules on gifts

If you gift Rs 30,00,000 to your wife, then different tax rules will apply to it. Section 64(1)(IV) of the Income Tax Act, 1961 says that if a husband gifts money to his wife, then the wife will not have to pay tax on the income earned from that money. That income will be added to the income of the person giving the gift (here husband). Then tax will have to be paid on the entire income as per the slab.

This is how tax will be calculated on giving a gift

This can be easily understood with the help of an example. Suppose the 30 lakh rupees given to the wife gives an income of 6 lakh rupees in a year. So this income will be added to the husband’s income. This will increase the husband’s total income to 36 lakh rupees annually. He will have to pay tax on 36 lakh rupees instead of 30. Suppose the husband’s taxable income is 28 lakh rupees, then after adding the income from your gift, your total taxable income becomes 34 lakh rupees. On the taxable income of Rs 34 lakh, in the old regime, you will have to pay a tax of Rs 8,58,000, whereas in the new regime you will have to pay a tax of Rs 7,77,400.

Calculation of tax on giving a loan

Now we assume that the husband gives a loan of Rs 30,00,000 to the wife. He gives this loan at an annual interest of 10 percent. By using this loan money, the wife earns Rs 6 lakh. The wife pays 10 percent interest to her husband, which means she pays Rs 3 lakh to her husband. Now her profit reduces to Rs 3 lakh.

Less tax on giving loan instead of gift

Now the husband’s income is Rs 31 lakh (28+3). On this income of Rs 31 lakh, the husband’s tax in the old regime will be Rs 7,64,400, while in the new regime it will be Rs 6,83,800. This means that the husband is getting tax benefits on giving loan as compared to gift. The wife’s income is Rs 3 lakh, due to which no tax will be levied in the new income tax regime. In the old regime, only nominal tax will be levied. It has to be kept in mind that this calculation of tax is for the assessment year 2025-26.

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