Anjali Goyal

anjali goyalWhat is Clubbing of Income?

Clubbing of Income is basically the concept of imposing tax on other person than the actual recipient of the income where other person is the transferor who diverted such income or transferor of the transferred asset out of which income has been generated.

When concept of clubbing of income is attracted , the transferor is been taxed in place of recipient and such income is added to the income of transferor under the respective head and is taxed in the same manner as if transferor is the actual recipient of such income.


The provisions of clubbing of income shall be attracted:

1. If income has been transferred without transfer of assets (Sec 60).

Exception: Diversion of income by overriding title, which means that income has been diverted because of a legal obligation.

2. If there is revocable transfer of assets (Sec 61).

(where revocable transfer means transfer which contains provision of re-transfer or gives the transferor a right to re-assume power during the lifetime of the transferee)


Transfer of assets without adequate consideration

Section Transferred to Income accrued from such asset shall be clubbed or not ?
64(1)(iv) Spouse Yes
64(1)(vi) Son’s wife Yes
64(1)(vii) AOP for the benefit of spouse Yes
64(1)(viii) AOP for the benefit of son’s wife Yes
  • It shall be noted that in case of direct transfer of assets to spouse and son’s wife ( i.e. first two cases above) , the relationship with spouse and son’s wife must exist both at the time of transfer of asset and at the time when income accrued .
  • Also under section 64(1)(iv) , clubbing shall not be done if transfer of asset is in connection with an agreement to live apart.

Change in status of relationship with spouse/son’s wife

Existence of relationship at the time of Clubbing shall be done or not ?
Transfer Income accrued
Yes No No
No Yes No
Yes Yes Yes
No No No


  • An individual transferred his asset without adequate consideration to his spouse in an agreement to live apart , but the said agreement was dissolved before income accrued. In this case, clubbing provisions shall be attracted since relationship should be in existence during the accrual of income.
  • If the relationship did not existed after the transfer of assets for a certain period but it came together again before income has been accrued, clubbing shall be done since relationship was in existence both at the time of transfer of assets and income accrual. Whether the relationship was not in existence for a period in between doesn’t avoid clubbing provisions.
  • A security whose income is accrued after 10 years in lumpsum has been transferred to the spouse when relationship did existed. But the relationship after 9 years has been collapsed. Whether income received in lumpsum after completion of 10 years shall be clubbed in proportionate basis for 9 years?

In my opinion, Since there is no law for proportionate calculation of income for clubbing, only the criteria of relationship status shall be valid . In the above case, since the relationship was not existed when income has been accrued, clubbing provisions shall not be attracted.


1. Income of spouse from a concern in which individual has substantial interest (Sec 64(1)(ii))

When spouse of an individual received any salary, commission, fees or any form of remuneration, in cash or kind , from a concern in which the individual has substantial interest , such received income shall be clubbed in the hands of such individual, where, substantial interest means having 20% or more voting power or share in profit at any time during the previous year.

Exception: If income is attributable to the spouse for his/her technical or professional qualification, knowledge and experience, clubbing shall not be done.

Various cases of clubbing

Substantial interest in the concern Income attributed out of technical/ professional work Clubbing provisions
By individual By spouse  
Yes No No Yes
Yes No Yes No
Yes Yes No Income shall be clubbed in the hands of individual whose income is greater
Yes Yes Yes
  • It shall be noted that in last two cases , it doesn’t matter whether spouse has been receiving salary for his technical/professional work , income shall be clubbed in the hands of the individual whose income is greater before adding such salary income.

2. Income of Minor child (Sec 64 (1A))

Income of minor child including minor married daughter shall be clubbed with the income of parent.


– Minor child suffering from disability specified under section 80U of the Income tax Act.

– Income earned by minor child ,on account of manual work , or activity involving application of his skill, talent, specialised knowledge and experience.


– Where the marriage of parents of the child subsists , the income of the minor child shall be included in the income of that parent whose total income excluding the income includible under this section is greater.

– Where the marriage does not subsist , the income of the minor child shall be included in the income of that parent who maintains the minor child in the previous year.

– Where none of the parent is alive , minor shall file the return through legal guardian . No clubbing shall be done.


  • If minor child has invested the earned income on account of manual work, application of skill etc, the income earned on such invested income shall be clubbed.

– The criteria that such invested income was income out of his skill has to be ignored and clubbing shall be done

  • If minor has attained majority in the previous year, the income shall be clubbed in the proportionate basis.
  • If a minor married daughter is the recipient of income out of assets transferred to her without adequate consideration by his husband.

In such case, Sec 64(1)(iv) shall prevail over Sec 64(1A) and such income shall not be added with the income of parents but to be clubbed with her husband’s income.

  • Where marriage of the parents does not exists and none of the parent maintains the minor child, in such case the income of minor child shall not be clubbed with either of the parents.

Although if marriage of the parents does subsists but they don’t maintains the minor child , the income of such minor child shall not be clubbed with either of the parent.

3. Conversion into HUF property (Sec 64(2))

Where separate property of the individual is converted by the individual into property belonging to the family otherwise than for adequate consideration, income derived from the converted property shall be deemed to be the income of the individual till the time partition takes place. And where the converted property has been the subject matter of a partition, the income derived from such converted property as is received by the spouse on partition shall be clubbed with the income of the individual.

If assets transferred by an individual to his spouse/son’s wife are invested by the transferee in any business, then the following income shall be clubbed with the income of the transferor individual:

Transferee should withdraw the invested income on the first day of the previous year and may re-invest on or after second day of such previous year to avoid the clubbing provisions.


If interest free loan is given by:

– Husband to Wife

– Individual to son’s wife

-Individual to his HUF,

and the person to whom the loan is given purchases an asset out of the loan, then income from such asset shall not be clubbed in the hands of the person who has given the loan.

Here, adequate consideration shall be the repayment of the principal amount after a certain period.  Whether the interest has been charged or not shall not attract clubbing provisions.

(Author is a Licentiate Company Secretary and CA Final student of ICAI and she can be reached For any queries or suggestions, at [email protected])

Also Read- Clubbing of Income and related provisions- Part II

(Author is a Licentiate Company Secretary and CA Final student of ICAI and she can be reached For any queries or suggestions, at [email protected])

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  1. Sandip says:

    Respected madam,can u provide me the case study that interest free loan given to spouse will not club as loan is not regard as transfer

  2. Anjali Goyal says:

    For the second chart in relation to change in relationship status ,
    First raw last column , ‘YES’ shall be replaced by ‘NO’ ,
    since clubbing shall not be done because existence of relationship is vital at both the time of transfer and accrual of income.( Typography mistake)

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March 2021