Investing in PPF through wife's account: Will the maturity amount be taxed in your hands?

Explaining how these rules work, CA Abhishek Soni, CEO & Co-founder, Tax2win said: "If the PPF maturity amount is transferred to your wife's account as a gift, the gift itself is not taxable, as gifts received from a spouse are exempt from tax under the Income-tax Act. Additionally, the PPF maturity proceeds are tax-free in the hands of the original account holder."

"However, if your wife invests the gifted amount in instruments such as fixed deposits, bonds, shares or mutual funds, the income earned from those investments, such as interest, dividends or capital gains, will generally be clubbed with your income under Section 99(1)(iv) of the Income-tax Act, 2025, and taxed in your hands, since the investment was made using money gifted by you," added tax expert Abhishek Soni.

What do the clubbing provisions say?

Generally, income is taxed in the hands of the person who earns it.

However, under the clubbing of income provisions, income from an asset transferred to a spouse without adequate consideration is generally taxed in the hands of the transferor.

This rule does not apply to income earned on the income generated from the transferred asset (second-generation income), which is taxable in the spouse's hands.

PPF latest interest rate

Certain small savings schemes can help taxpayers reduce their tax liability under Section 80C of the Income Tax Act, provided they opt for the old tax regime. Investments of up to ₹1.5 lakh in a financial year are eligible for deduction under this section.

The Public Provident Fund (PPF) is one such investment option. The interest earned on PPF deposits is tax-free, and the maturity amount is also exempt from tax, making it a popular choice among taxpayers looking for long-term savings with tax benefits.