Gifting property to your spouse? The taxman is watching now

₹45 lakh to the tax department. Until the last financial year, only property sales, not gifts that did not involve a sale, were reported.“Registrars will now submit a SFT (Statement of Financial Transaction) with details of such transactions and it will reflect in the taxpayer’s AIS (Annual Information Statement).

These transactions were not visible to the tax department so far, which will now change,” said Bhawna Kakkar, chartered accountant and founder, Kakkar & Co., Chartered Accountants.The disclosure will allow the tax department to verify whether any income or tax implications linked to the transfer have been properly reported.The move could affect taxpayers who ignore so-called clubbing provisions in the tax law.Under these rules, if an individual transfers an asset to their spouse, minor child or daughter-in-law without adequate consideration, any income arising from that asset, such as rent, dividends, interest or capital gains when the asset is sold, must still be taxed in the hands of the original owner (the transferor), not the recipient.In other words, simply gifting a property to a spouse does not shift the tax liability on the income it generates.Many individuals gift immovable property or investments to spouses to take advantage of lower tax slabs or avoid surcharge, said Kakkar."Say a man’s income is ₹1 crore. If he reports rental income or invests in his own name, he will need to pay a surcharge of 15%.

So, to save tax he gifts the property to his wife who may be in a lower tax slab or non-earning member and benefit from lower slab rates,” Kakkar said. But as per the law, the man will need to report the rental income in his ITR and pay tax, along with surcharge.Clubbing provisions do not apply when