Concept of joint tax filing does not exist in India
January, 02nd 2015
Taxation of any income earned by an individual would depend on various factors such as residential status, nature of income, quantum of income, and others. Further, it may be noted that the concept of joint filing does not exist in India. Only in certain circumstances, the income of the wife shall be clubbed in the hands of her husband. For example, where a property has been transferred in the name of the wife without any consideration, the rental income, if any, shall be taxable in the hands of her husband. However, we understand that the income earned by your wife has been earned on her own account and therefore, such provisions may not be applicable. Every individual whose income exceeds maximum amount not chargeable to tax would have to file a return of income in India. In order to file an income tax return (ITR), a person must apply for and obtain a Permanent Account Number.
Does the amount credited by my friend come under a special tax bracket? Can I add that to my bank interest as my source of income?
Where any individual receives money in excess of `50,000 in any financial year without any consideration, such money will be taxed as income from other sources in the hands of the recipient. However, this rule does not apply to money received from any relative or on the occasion of your marriage. The definition of ‘relative’ does not include a friend. Therefore, the entire amount credited by your friend shall be chargeable to tax under the head “income from other sources” at the applicable slab rates, if such amount exceeds `50,000, is received without any consideration and not on occasion of your marriage. The interest income earned from bank on the outstanding deposits and the income received from your friend, would be taxed as income from other sources. Interest credited by banks would be subject to tax deducted at source (TDS) at the rate of 10% (plus applicable surcharge and cess), in case of residents. In the case of non-residents, TDS would depend on the double taxation avoidance agreement entered into by the government of India and the country in which you are a resident, as applicable. The taxes so deducted would be available as a deduction against your total tax liability. The return of income (ROI) requires a specific disclosure to be made in relation to TDS being claimed. You could input the TDS claim in your ROI on the basis of the certificate that would be issued by the bank from which you earn interest.