Gifting money to your spouse? Here's when tax applies and who pays it

Gifting money between spouses is tax-exempt under the Income-tax Act, but clubbing provisions under Section 64 apply if the gifted money is invested and generates income.

Clubbing provisions tax the income from such investments (e.g., interest, dividends, capital gains) in the hands of the gifting spouse, not the recipient spouse.

Gifts from relatives, including spouses, are fully exempt from tax regardless of amount or purpose.

The clubbing rules aim to prevent tax avoidance by shifting assets to a lower-income spouse for investment purposes.

If the gifted money is not invested and remains idle, no clubbing applies and no tax is owed on the gift itself.