is meant to check tax evasion if you are taxed on the income is there any point in investing in your wifes name yes there is the clubbing happens only at the first level of income if this money is reinvested and earns an income it will be treated as your wifes not yours the income from the reinvested income does not attract the clubbing provision points out sudhir kaushik chartered accountant and cofounder of tax filing portal taxspannercom heres how you can make this rule work for you gift money to your wife and then get her to invest in any of the several taxfree investment options see graphic the earning will be clubbed with your income but since these investment options are taxfree it wont push up your tax liability your wife can then reinvest that money and this time the income will not be clubbed theres another way to escape clubbing instead of gifting give her a loan to buy property rental income from the property will be treated as her income as long as she pays you a nominal interest on the loan also read salary will empower homemakers 3 avail of minor exemption as mentioned earlier if a parent invests in a minor childs name the income is clubbed with that of the parent who earns more in some cases a minor child may have a personal income such as a cash prize in a competition or payments for commercials and events however this is rare and mostly its the parent who invests on behalf of the child there is a small rs 1500 exemption per child per year for the income earned by such investments you can avail of this for a maximum of two children this means you can safely invest rs 15000 in a fixed deposit in your childs name if you have two children thats rs 30000 earning taxfree income every year opt for the annual payout option because the cumulative option will push up the earning beyond the taxfree limit in a couple of years as the compounding effect comes into play tax experts feel the rs 1500 exemption per child is too low and should be raised but there are others who think this should be removed a simpler tax structure will encourage greater compliance the original dtc had proposed the removal of nearly all exemptions and deductions but raised the basic exemption limit and tax slabs 4 take help of an adult child rebellious obdurate lackadaisical wasteful parents have several adjectives for collegegoing children allow us to add taxsavers to this list you can save a neat sum by investing in the name of an adult child after a person turns 18 he is treated as a separate individual for tax purposes this means his earnings are no longer clubbed with his parents income and he enjoys the same exemptions and deductions as any other adult taxpayer gifting money to a child above 18 and then investing