Income from Debt funds in Joint Demat account is considered whose?

General
1

Hello,

Currently following two people have a joint saving account:
Husband: Retired. Just received some retirement money from employer.
Wife: Still working and has 8 yrs to retirement.

So if they open a joint demat account with thier current joint saving account and invest the retirement money of the husband in debt funds. Then the interest on this income will be considirede whose income?
Because if the interest from debt fund is considered wife’s income then she would have to pay tax according to her tax bracket. And if it is considered as husband’s income then it will be tax free until 2.5Lakh.

Can someone please explain what will happen in this situation?

1 Like
2

Hi @metallicsigma

The primary or first holder of the joint demat account is liable to pay taxes on the P&L.

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3

Thank you Meher for the answer.

For example, if in above case if the wife (secondary holder) also put in some money. And profit is made on that secondary holder’s money too, then also the primary holder has to pay tax on this money too ?

4

Hey @metallicsigma,

In the case of Joint owners, the first holder of an account is considered as an owner of the account i.e. his/her PAN will be linked to the profits made on that account. Hence, the first holder will be liable to pay taxes on the profits earned.

In your case, whoever is the first holder of the account will be taxed for profits earned from an account. And if the total income of a first holder falls under a higher income tax slab rate then they will end up paying higher taxes.

5

can the income tax department hold the 2nd holder liable ; if the 1st holder default in payment of the tax ?

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@Quicko Thanks for the response.

But what about the money deposited by the secondary account holder?
Does the primary account holder has to pay the tax on income earned from the money deposited by the second account holder ?

7

Hi @metallicsigma,

As mentioned previously, the primary holder’s PAN will be linked to the income made on the account. Hence, the primary holder will be liable for paying taxes on the same.