New Delhi, June 28 -- Transferring money to your spouse may seem like a smart move to reduce your tax liability but the income tax law sees through it. For instance, if you transfer funds to your wife and she invests it in fixed deposits, gold, mutual funds or stocks, it may trigger clubbing provisions, where the income from those assets gets added back to your own taxable income.

Under Section 64 of the Income-tax Act, the clubbing provisions are meant to prevent taxpayers from reducing their tax liability by transferring assets or income to certain family members. Here's how the clubbing rules work, when they apply and how can you plan your finances within the law.

Clubbing of income refers to the inclusion of another person's income ...