Provisions under section 64(1)(vii): Where an Individual is assessable for the Income derived from the assets transferred to a person for the benefit of spouse

As per section 64(1)(vii) of the Income Tax Act, if an individual (assessee) transfers his/her asset (directly or indirectly) otherwise than for adequate consideration to a person or an association of persons (AOP) for an immediate or deferred benefit of his/her spouse, then the income resulting from the transferred asset will be clubbed with the income of transferor.

The specified provisions contained under section 64(1)(vii) of the Income Tax Act is applicable if the following conditions are satisfied—

  • 1st Condition: The assessee is an individual.
  • 2nd Condition:The assessee has transferred an asset.
  • 3rd Condition:The transfer made by the assessee may be directly or indirectly.
  • 4th Condition:The asset has been transferred by the assessee to a person or an association of persons (AOP).
  • 5th Condition:The asset has been transferred by the assessee for an immediate or deferred benefit of his/her spouse.
  • 6th Condition:The transfer is for inadequate consideration

If the above-mentioned conditions are satisfied then income derived from such transferred asset to the extent of such benefit is taxable in the hands of the assessee who has transferred the asset.

In simple words, where an individual (assessee) transfers an asset to some other person for an inadequate consideration for the benefit of his/her spouse, the income on such transferred asset to the extent of benefit which accrues to the spouse, shall be clubbed in the total income of the individual (assessee).

For example,

Mr A transfers an asset to his friend B with an instruction that 80% of the income generated from the transferred asset is to be used for the benefit of his wife Mrs A and 20% for others, then the income from that asset to the extent of 80% shall be included in the total income of Mr A.

Read Also:-

S. No. Provisions of Set of and Carry Forward of Losses under Income Tax Act, 1961
1 Clubbing of Your Income with Income of your Spouse
2 Clubbing of income from assets transferred to Son’s Wife
3 Clubbing of income from the asset transferred to Spouse
4 Clubbing of Income on Revocable Transfer of Asset
5 Clubbing of remuneration income of Spouse from a Concern in which other Spouse has Substantial Interest
6 Set Off & Carry Forward of Loss under the head House Property
7 Clubbing of income of a Minor Child with Income of parent
8 Clubbing of Income from Self-acquired Property converted to Joint Family Property & subsequent Partition
9 Clubbing of Income from assets transferred to a person for benefit of spouse
10 Clubbing of Income from Assets Transferred to a Person for the Benefit of Son’s Wife
11 Carry forward & set off of Business Losses other than Speculation Loss
12 Set off and Carry Forward of Capital Loss
13 Set-off and carry forward of Speculative Business Loss
14 Set-off & carry forward of Loss from owning & maintaining racehorses
15 Set off and carry forward of losses of Specified Business | Section 73A

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