- Date : 11/07/2023
- Read: 3 mins
All the investments of the first account holders in joint bank accounts have tax risks. Check major joint-account tax implications in India.
- All income generated from investments held in a joint bank account has tax risks and implications for the first holder of the joint account
- Tax proceedings will be initiated by the income tax-department against the second account holder if the primary-holder fails to respond to queries
- You can use the online-verification process of SFT-transactions to save time for you and the tax officials
Joint bank accounts come in handy for investment, transfer of investments, and many more. However, in recent times, joint holders have been facing tax risks. If you are the first holder of a joint account, you are subjected to joint account tax implications in India. Do you want to learn more? Keep scrolling down.
According to the income tax laws of India, investments in joint bank accounts and income generated from them belong to the first-holder of a joint account. This means that it is the first holder who is liable to pay taxes on all investments and income in a joint account.
The second holder of the joint account doesn't have to pay any taxes. They may have to pay taxes only if they contribute to the investment. In that case, they will be taxed as per their contribution to the investment in their joint account.
Tax officials have initiated many tax reassessments against joint bank account holders in the last few months after getting details from SFT (Specified Financial Transaction) statements.
Such reassessments allow joint holders to provide details about the source of investments. Most people are forced to seek help from tax professionals, which is time-consuming and expensive.
Many joint-bank account-holders are non-resident Indians. They usually don't register contact details (phone number or email id) with the income tax department. In such cases, they usually don't receive any communication from the tax officials regarding tax assessment. So, the chances of them not responding to reassessment notices are high.
NRIs who provide overseas-addresses receive notices. They can use the online-verification process of Specified-Financial-Transactions to answer queries of the tax-officials. Their choices are to:
- Partly agree
In almost all of these cases, it has been seen that the tax department concludes that the joint account holders don't have to pay taxes.
First and second holders of bank accounts can be taxed if both of them have contributed to the investment in their joint account. In addition, the interest you earn from your investments in joint accounts is also taxable. Keep them in mind while filing your taxes. It will help you avoid the tax risks associated with joint accounts.