Investing in PPF, SSY from household savings: How will clubbing rule under Section 64 apply?

financialexpress.com:

Does clubbing of income under Section 64 apply if a housewife saves money from household expenses to invest in schemes like the Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY) etc? Tilak Nath Sinha recently wrote to FE Money asking this question.

Sinha said as monthly household expenses, the husband (service holder) and father-in-law (pensioner) pay Rs1 lakh and Rs 20,000 respectively. Father-in-law is 83 years old and living jointly under the same roof as the homemaker. “If she saves some small amount from the monthly expenses and deposits in PPF/NPS/SSY a/c of in her and her child’s name, how will the rules of clubbing u/s 64 apply?” Sinha asked.

Dr Suresh Surana, Founder, RSM India (a tax consultancy firm) has answered Sinha’s queries:

Section 64(1)(iv) of the Income Tax Act provides that the clubbing provisions shall be applicable with respect to income arising directly or indirectly from any asset transferred to his/her spouse otherwise than for adequate consideration. Further, clubbing would also be applicable u/s 64(1)(vi) wherein income is arising to the son’s wife i.e. daughter in law from assets transferred directly or indirectly otherwise than for adequate consideration.

In the given case, the funds are transferred to the wife by her husband and father-in-law which is further utilized by the wife to make investments. Such money is transferred via gift (i.e., without adequate consideration) and, hence, the provisions of sections 64(1)(iv) and 64(1)(vi) will be attracted. The provisions of clubbing will apply even if the form of asset is changed by the transferee-spouse/daughter-in-law.

Accordingly, the interest from investment arising in the hands of the wife would be clubbed in the hands of the