Why returns from Pin Money and Streedhan of a woman cannot club with her husband’s income?

( The intent of the clubbing provision is to control tax evasion arising out of the transfer of assets and income to the spouse. Clubbing provisions of the income tax act also apply to assets or income transferred to the minor children from parents and from father in law to daughter in law, also to assets or income transferred to one’s HUF. The clubbing provisions are not just restricted to cash or bank transfers, but also apply to the transfer of other asset classes like shares, mutual funds, property — wherever there’s a whiff of tax evasion. )

Pin money is the reasonable quantum of savings by a woman out of the monthly allowance she receives from her husband to run the household or to meet her own expenses. Any return generated out of investing Pin money would not be subject to clubbing provisions of the income tax act.

How pin money is different from other money held by a woman?

Let us take an example, the husband gives Rs.10 lakh to his wife and the wife invests that money in a bank fixed deposit and generates interest @5% per annum (Rs.50, 000). This amount of Rs.50, 000 is considered as the husband’s income while assessing his income tax liability for the related financial year.  This is because the amount gifted by the husband, in this case, is not the money saved by the wife out of the monthly allowance she receives from her husband to run the household or to meet her own expenses and therefore that cannot be treated as pin money.

The above rule also applies if a woman is a partner in a partnership firm with her husband and receives salary or profit without application of her skill. On the other hand, where the wife possesses technical or professional qualifications in relation to any income arising to the spouse and such income is solely attributable to the application of his/her technical or professional knowledge and experience, clubbing provision is not attracted. Whenever the Tax authorities open the IT return of the assessee, they consider the size of the husband’s income, the total expenditure of the household, the extent of the contribution made for the household expense, justification for the quantum of savings being made by the spouse, etc. It means pin money has to be a reasonable quantum of savings by the woman out of the monthly allowance she receives from her husband; such Pin Money can be freely invested by her without the husband fretting about the returns being clubbed to his income. Pin Money is, therefore, treated at par with salary or any business she may have been running on her own.      

Clubbing provision of income tax act:

As the word suggests, clubbing of income means adding or including the income of another person (mostly wife’s income) to one’s own income under Section 64 of the IT Act. The intent of the clubbing provision is to control tax evasion arising out of the transfer of assets and income to the spouse. Clubbing provisions of the income tax act also apply to assets or income transferred to the minor children from parents and from father in law to daughter in law, also to assets or income transferred to one’s HUF. The clubbing provisions are not just restricted to cash or bank transfers, but also apply to the transfer of other asset classes like shares, mutual funds, property — wherever there’s a whiff of tax evasion.

Streedhan:

Streedhan is the amount collected by the bride out of gifts and contributions to her by her relatives and well-wishers. Streedhan can be freely invested by a married woman without the husband fretting about the returns being clubbed to his income for income tax assessment.

 According to various judgments of the Supreme Court, “Hindu married woman is the absolute owner of her Streedhan property and can deal with it in any manner she likes. The bench of Dipak Misra, Prafulla C. Pant, of Supreme Court in the case of Krishna Bhattacharjee vs Sarathi Choudhury And Anr on 20 November 2015, the Court said the concept of “continuing offence” gets attracted from the date of deprivation of streedhan, for neither the husband nor any other family members can have any right over the Stridhan and they remain the custodians. As long as Stridhan remains in the custody of the husband, the wife can always put forth her claim under Section 12 of the 2005 Act”, it added. It means a person having custody of “Streedhan” is legally bound to return it to her as and when she needs it without any conditions or lien and returns from its investments will not be clubbed with her husband or any other person’s income.

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