Apart from all the excitement it brings, Getting married is the biggest plan of your life. A plan which would decide what your remaining life would look like. Once you narrow in on your wedding plans, you would do well to understand its tax implications. Read On
- Before you tie the knot
- On the wedding day
- Starting your Life
Before you tie the knot
Before the big day, it pays to visit a Tax Consultant. Schedule your appointment with him and add it as a part of your wedding tasks. Discuss with the Tax Consultant and find out your tax slab. If you happen to be in the highest tax slab (If your taxable income exceeds 5 Lakhs), Get ready for some serious tax planning. The wedding knot brings gifts with them. If a spouse gifts anything to his/her spouse, the income arising out of such gift bounces back to the donor-spouse. So it’s a good idea to consider making a gift to your would-be spouse before you tie the knot. Such pre-marital gifts do not attract the clubbing provisions. A smarter way would be to organize exchange of assets to avoid clubbing provisions, e.g. a husband can exchange his income earning assets with the jewellery owned by his wife.
On the wedding day
Wedding brings a shower of Gifts from your friends and colleagues. You would certainly be really busy on these days. It’s a good idea to ask a trusted friend of yours to handle your gifts. There is a common practice of giving gifts in cash and kind on certain ceremonies such as engagement,meeting the bride with presents, and tilak (formalizing the marriage event). Keep separate accounts for all the gifts received on the wedding day so that they can form the sources of future income through suitable investments Gifts received on this How to plan your marriage occasion are exempt from tax however you shoulder the burden of maintaining enough proofof receipt.
Starting your Life
If you happen to be a professional like a doctor or lawyer, It would be a good idea to ask your spouse to take care of the non-professional functions of your institution. However, if you plan to pay a salary out of your income to your spouse, chances are that the Revenue Authorities might not allow you to do so. It is in such cases that provision for clubbing of remuneration received by spouse in any form from a concern in which the individual has substantial interest becomes relevant. However In case your spouse possesses technical qualifications, any remuneration received will not be clubbed; but it will be taxed in his/her hands only. Since the accretions to income arising on the transfer of asset does not attract the clubbing provisions you can gift any amount which can be invested by your wife in fixed deposit, etc. It is only the interest on such amount gifted that is included in the income of the individual. The interest on interest does not attract the clubbing provision. If you have been running a Proprietary Business, It might be a good idea to convert it into a partnership business. Both the husband and wife can be partners in the same firm. As a firm is a legal entity, income earned by the partners is taxed as the income of the firm and the share of profit accruing to each partner is tax exempt in their hands. With this clause, the capital and the net worth of the wife can be enhanced resulting in higher income in the future years. The remuneration paid to partners is deductible in the hands of the firm up to a prescribed ceiling.