Can a husband claim 80C tax benefits on PPF or ELSS invested in wife’s name?

Can a husband claim 80C tax benefits on PPF or ELSS invested in your wife’s name?

Expert's Advice: Deductions under Section 80C are available for certain investments made or expenses incurred by an individual or an HUF. For some items, the deduction can be claimed only if the payment or investment is made by or in the name of the taxpayer. For others, the deduction is allowed even if the amount is paid or invested in the name of the taxpayer, spouse, or children.

You can claim a deduction under Section 80C for contributions made to your own Public Provident Fund (PPF) account, or to the PPF accounts of your spouse or children. The amount can even be deposited in the PPF account of children who are married or financially independent, and not just those who are minors or dependent on you.

However, certain eligible investments, such as Equity Linked Savings Schemes (ELSS) qualify for deduction only if the investment is made in the taxpayer’s own name. Therefore, you cannot claim the tax benefit for ELSS units purchased in your wife’s name, even if you are the second holder.

When you invest money in your wife’s name, such contributions are treated as a gift from you, with no immediate tax implications. However, under Section 64 of the Income Tax Act, any income arising to your wife from the gifted amount or asset must be clubbed with your own income.

The interest earned on a PPF account is fully tax-free, so clubbing provisions do not affect it during the accumulation phase. But when the PPF matures, any income attributable to the contributions made by you will need to be included in your taxable income year after year. For ELSS investments, the capital gains on redemption must be included in your income and taxed under Section 112A.

Finally, deductions under Sections 80C, 80CCD, 80D, 80TTA, 80TTB, etc., are available only if you opt for the old tax regime, as these deductions are not permitted under the new tax regime.