Clubbing of Income as the term suggests it means adding the income of other person’s income in the income of the person who is paying the tax. This term is explained under Section 64 of the Income Tax Act. Though, there are certain restriction to specified person and to specified scenario which are mandatorily to discouraging the practice.
Income of every person or any person cannot be clubbed in the income for calculating the total income of the person who is paying the tax and also to be noted not all income can be clubbed in the income. Section 64 has specified about the person and specified about the income which can be clubbed to calculate the total income of any person who is paying tax.
As per this section, if any person is transferring income without actually transferring asset by way of an agreement or by any other way then, the income of such asset can be clubbed in the hands of transferor.
As per this section, if any person is transferring asset on the condition that it will be revoked then, if there is any income it will be clubbed in the hands of transferor.
As per this section, if any minor child is receiving income and it also includes the minor child, step child and even if there is adopted child. The provision of clubbing is also applied to minor married daughter. The income will be clubbed in the hands of the parent who has higher income.
As per this section, if your spouse is receiving any remuneration irrespective of its nomenclature like salary, fees, commission etc. by any mode which is in cash or in kind from any organization in which you have substantial interest then, income will be clubbed in the hands of taxpayer whose income is higher.
As per this section, if your spouse is transferring directly or indirectly any asset to the spouse by the assesse for inadequate consideration then, income will be clubbed in the hands of the transferor. Point to be noted is the asset shall be other than house property.
As per this section, if you transfers the asset directly or indirectly to your daughter in law for inadequate consideration the, income will be clubbed in the hands of transferor.
Author- Adv.Shivam Kumar
Legel and content Executive, Taxblock India Pvt. Ltd