Jigar M. Patel
International Tax Attorney
Hundreds of thousands of households in our country are managed by versatile and skilful women who weave the bonding of their family in one unison. The common thread of efficient financial management runs through each household, thanks to them. The source of funds for a household lady, colloquially referred to as a homemaker, is out of the amounts given by her husband every month to look after the household needs or meet her personal expenses. Pin money is the amount saved by the homemaker from out of such moneys.
Financial competence of homemakers is reflected in the fact that there would be very few women who cannot manage to save out of the household allowances given to them. They can even save the extra rupee by smart bargaining with traders or clever negotiation with street vendors. It is not uncommon to see homemakers coming to the rescue of their families in times of distress through their secret source of savings accumulated over the years.
Taxability of Pin Money and income earned therefrom
A number of judicial pronouncements have well settled the legal proposition that Pin money is not in the nature of income and therefore cannot be subjected to tax. It is pertinent to note that at the time of demonetization, this aspect came to be also logically accepted by the Income-tax Department, which is duly supported by the issuance of the CBDT Circular clarifying that cash deposit of demonetized currency notes to the tune of Rs. 2.5 lakhs in a bank account would not be questioned.
However, any investments made by a lady from such Pin money (for e.g., into deposits, shares or mutual funds) would be subject to tax as and when the income by way of interest, dividend or capital gains arises on the same.
It needs to be also noted that such income from Pin money cannot be subjected to the clubbing of income provisions under the Income-tax Act, the logic being that such money does not represent a gift from her husband, but is infact her skilful saving and therefore the income arising from the same is taxable in her own hands and cannot be clubbed with that of her husband.
How much amount can be claimed as Pin Money?
Another important question for consideration is the quantum of money which can reasonably be termed as Pin money, with a view to check the misuse of the proposition for exemption or circumvent the clubbing provisions for tax avoidance. Considerations to be kept in mind for this purpose would be the size of husband’s income, total expenditure of the household, extent of the contribution made for household expenses, justification for quantum of savings by the homemaker, etc.
Pin Money akin to ‘Stree Dhan’
The exclusivity of ownership of ‘Pin Money’ can be considered similar to ‘Stree Dhan.’ Streedhan has been defined to include various gifts, jewelry, cash and properties that a woman receives from family or friends before, during, and after marriage, including during childbirth and widowhood. Courts have recognised this right of absolute ownership of a married Hindu woman and held that neither her husband nor her in-laws can have any right or claim on a lady’s Stree Dhan.
