How to submit AIS feedback if mutual fund buys are reflecting under the wife's PAN in a joint holding

Suppose a man and his wife are holding mutual funds jointly. The man purchases the MF units regularly from his savings and also files the income tax return, while his spouse is a housewife with income below the taxable limit.

As his wife's income is below the basic exemption limit, she doesn't file an income tax return. However, her Annual Information Statement (AIS) is also showing the purchase of the mutual fund units against her name as a specified financial transaction (SFT). In this case, what should she do? Will this attract any income tax notice? Should she file ITR?

A. Venkat shared the above query based on a hypothetical situation via e-mail. Here's what he wrote in an email to us:

"Take the case of mutual funds held in the joint names of, say, Mr. A and his wife, Mrs. A, and the joint holding is mainly for operational convenience, etc. Mr. A regularly purchases MF units using his savings and also files his Tax returns. Mrs. A is a housewife and does not need to file tax returns as her income is below the taxable limit. However, in the Annual Information Statement (AIS) purchase of MF units is also reported against Mrs. A as a Specified Financial Transaction (SFT). Will this attract any queries from the Tax department? What should Mrs. A do to avoid any further tax queries, and if she has to give feedback in AIS, what feedback type should she choose from the dropdown menu - say 'Info not fully correct', 'Info. Relates to other PAN, etc."

CA Akshay Jain, Direct Tax Partner, NPV, Associates LLP, has answered the above query in detail below:

In this scenario, a man and his wife hold units of mutual funds jointly, where all the investments are made from the husband’s income, and the woman is a housewife with income below the taxable threshold.

In case of joint mutual fund holdings, the primary holder (i.e., the person who has paid for the investment) is liable for income tax on the income arising from such investments.

Since the husband invested from his income, he will be liable to disclose and pay tax on any capital gains from the sale/redemption of MF units or any dividend income (if applicable). The wife, despite being a joint holder, has no beneficial ownership or tax liability.

Under Rule 114E of the Income Tax Rules, reporting of Specified Financial Transactions (SFT) includes mutual fund purchases exceeding ₹10 lakh in a financial year. These are reported by mutual fund houses and may mention all joint holders.

Hence, the wife’s PAN gets linked in AIS even though she is not the beneficial owner. There is a possibility of an automated query or compliance intimation under the e-Campaign or e-Verification schemes if high-value transactions appear in AIS, especially when the person (wife) does not file ITR, and the AIS shows significant financial transactions under her PAN. However, such queries are typically automated and can be clarified by providing feedback in AIS.

In the AIS portal, the wife should select the appropriate feedback option for each MF purchase reflected under her PAN as "Information relates to other PAN". Since the investment does not relate to her income or funds, and the actual investor is the husband, this option is most accurate.