Article explains Provisions related to Clubbing of Income with relevant FAQs explaining Clubbing in the case of Section 60- Transfer of Income without transfer of Assets, Section 61- Revocable transfer of Assets, Section 64(1)(ii)- Salary, Commission, Fees or remuneration paid to spouse from a concern in which an individual has a substantial* interest, Section 64(1)(iv)- Income from assets transferred directly or indirectly to the spouse without adequate consideration, Section 64(1)(vi)- Income from the assets transferred to son’s wife, Section 64(1)(vii),(viii)- Transfer of assets by an individual to a person or AOP for the immediate or deferred benefit of his:(vii) – Spouse (viii) – Son’s wife, Section 64(1A)- Income of a minor child [Child includes step child, adopted child and minor married daughter] And Section 64(2)- Income of HUF from property converted by the individual into HUF property.
Clubbing of income means Income of other person included in assessee’s total income, for example: Income of husband which is shown to be the income of his wife is clubbed in the income of Husband and is taxable in the hands of the husband. Under the Income Tax Act a person has to pay taxes on his income.
A person cannot transfer his income or an asset which is his one of source of his income to some other person or in other words we can say that a person cannot divert his income to any other person and says that it is not his income. If he do so the income shown to be earned by any other person is included in the assessee’s total income and the assessee has to pay tax on it.
Chart Explaining Income Tax Provisions related to Clubbing of income
| Section | Nature Of Transaction | Clubbed In The Hands Of |
Conditions/ Exceptions
|
Relevant Reference |
| Section 60 | Transfer of Income without transfer of Assets. | Transferor who transfers the income. | Irrespective of: 1. Whether such transfer is revocable or not. 2. Whether the transfer is effected before or after the commencement of IT Act. |
1. Income for the purpose of Section 64 includes losses. [P. Doriswamy Chetty 183 ITR 559 (SC)] [also see Expl. (2) to Section 64]
2. Section 60 does not apply |
| Section 61 | Revocable transfer of Assets. | Transferor who transfers the Assets. | Clubbing not applicable if:
1. Trust/ transfer irrevocable during the lifetime of beneficiaries/ transferee or 2. Transfer made prior to 1-4-1961 and not revocable for a period of 6 years. Provided the transferor derives no direct or indirect benefit from such income in either case. |
Transfer held as revocable
1. If there is provision to re-transfer directly or indirectly whole/part of income/asset to transferor; 2. If there is a right to reassume power, directly or indirectly, the transfer is held revocable and actual exercise is not necessary. 3. Where no absolute right is |
| Section 64(1)(ii) | Salary, Commission, Fees or remuneration paid to spouse from a concern in which an individual has a substantial* interest. | Spouse whose total income (excluding income to be clubbed) is greater. | Clubbing not applicable if: Spouse possesses technical or professional qualification and remuneration is solely attributable to application of that knowledge/ qualification. | 1. The relationship of husband and wife must subsist at the time of accrual of the income. [Philip John Plasket Thomas 49 ITR 97 (SC)]
2. Income other than salary, |
| Section 64(1)(iv) | Income from assets transferred directly or indirectly to the spouse without adequate consideration. | Individual transferring the asset. | Clubbing not applicable if, The assets are transferred;
1. With an agreement to live apart. 2. Before marriage. 3. Income earned when relation does not exist. 4. By Karta of HUF gifting co-parcenary property to his wife. 5. Property acquired out of pin money. [R.B.N.J. Naidu vs. CIT 29 ITR 194 (Nag.)] |
1. Income earned out of Income arising from transferred assets not liable for clubbed. [M.S.S. Rajan 252 ITR 126 (Mad)]2. Cash gifted to spouse and he/she invests to earn interest. [Mohini Thaper vs. CIT 83 ITR 208 (SC)]3. Capital gain on sale of property which was received without consideration from spouse [Sevential M. Sheth vs. CIT 68 ITR 503 (SC)]4. Transaction must be real. [O.N. Mohindroo 99 ITR 583 (Delhi)] |
| Section 64(1)(vi) | Income from the assets transferred to son’s wife. | Individual transferring the Asset. | Condition: The transfer should be without adequate consideration. |
Cross transfers are also covered [C.M.Kothari 49 ITR 107 (SC)] |
| Section 64(1)(vii),(viii) | Transfer of assets by an individual to a person or AOP for the immediate or deferred benefit of his: (vii) – Spouse. (viii) – Son’s wife. |
Individual transferring the Asset. | Condition:
1. The transfer should be without adequate consideration. |
1. Transferor need not necessarily have taxable income of his own. [P. Murugesan 245 ITR 301 (Mad)]2. Wife means legally wedded wife. [Executors of the will of T.V. Krishna Iyer 38 ITR 144 (Ker)] |
| Section 64(1A) | Income of a minor child [Child includes step child, adopted child and minor married daughter]. | 1. If the marriage subsists, in the hands of the parent whose total income is greater; or;
2. If the marriage does not subsist, in the hands of the person who maintains the minor child. 3. Income once included in the total income of either of parents, it shall continue to be included in the hands of some parent in the subsequent year unless AO is satisfied that it is necessary to do so (after giving that parent opportunity of being heard) |
Clubbing not applicable for:—
1. Income of a minor child suffering any disability specified u/s. 80U. 2. Income on account of manual work done by the minor child. 3. Income on account of any activity involving application of skills, talent or specialized knowledge and experience. |
1. Income out of property transferred for no consideration to a minor married daughter, shall not be clubbed in the parents’ hands. [Section 27]2. The parent in whose hands the minor’s income is clubbed is entitled to an exemption up to Rs. 1,500 per child. [Section 10(32)] |
| Section 64(2) | Income of HUF from property converted by the individual into HUF property. | Income is included in the hands of individual & not in the hands of HUF. | Clubbing applicable even if: The converted property is subsequently partitioned; income derived by the spouse from such converted property will be taxable in the hands of individual. |
Fiction under this section must be extended to computation of income also. [M.K. Kuppuraj 127 ITR 447 (Mad)] |
* An individual shall deemed to have substantial interest in a concern for the purpose of Section 64(1)(ii)
| IF THE CONCERN IS A COMPANY | IF THE CONCERN IS OTHER THAN A COMPANY |
| Person’s beneficial shareholding should not be less than 20% of voting power either individually or jointly with relatives at any time during the Previous Year. (Shares with fixed rate of dividend shall not be considered) | Person either himself or jointly with his relatives is entitled in aggregate to not less than 20% of the profits of such concern, at any time during the previous year. |
Note :The clubbed income retains the same head under which it is earned.
FAQs on Clubbing of Income
Q.1 What is the meaning of clubbing of income?
Ans. Normally, a person is taxed in respect of income earned by him only. However, in certain special cases income of other person is included (i.e. clubbed) in the taxable income of the taxpayer and in such a case he will be liable to pay tax in respect of his income (if any) as well as income of other person too. The situation in which income of other person is included in the income of the taxpayer is called as clubbing of income. E.g., Income of minor child is clubbed with the income of his/her parent. Section 60 to 64 contains various provisions relating to clubbing of income.
Q.2 Do any clubbing provisions exist in case of transfer of income without transfer of asset?
Ans. As per section 60, if a person transfers income from an asset owned by him without transferring the asset from which the income is generated, then the income from such an asset is taxed in the hands of the transferor (i.e., person transferring the income).
E.g., Mr. Raj has given a bungalow owned by him on rent. Annual rent of the bungalow is Rs. 84,000. He transferred entire rental income to his friend Mr. Kumar. However, he did not transfer the bungalow. In this situation, rent of Rs. 84,000 will be taxed in the hands of Mr. Raj.
Q.3 Do any clubbing provisions exist in case of a revocable transfer?
Ans. Revocable transfer is generally a transfer in which the transferor directly or indirectly exercises control/right over the asset transferred or over the income from the asset.
As per section 61, if a transfer is held to be a revocable, then income from the asset covered under revocable transfer is taxed in the hands of the transferor. The provisions of section 61 will not apply in case of a transfer by way of trust which is not revocable during the life time of the beneficiary or a transfer which is not revocable during the lifetime of the transferee.
Q.4 Can remuneration received by spouse of an individual be clubbed with his/her income?
Ans. Under certain circumstances as given in section 64(1)(ii), remuneration (i.e., salary) received by the spouse of an individual from a concern in which the individual is having substantial interest is clubbed with the income of the individual. Provisions in this regard are as follows:
- The individual is having substantial interest in a concern (*).
- Spouse of the individual is employed in the concern in which the individual is having substantial interest.
- The spouse of the individual is employed without any technical or professional knowledge or experience (e.,remuneration is not justifiable).
(*) An individual shall be deemed to have substantial interest in any concern, if such individual alone or along with his relatives beneficially holds at any time during the previous year 20% or more of the equity shares (in case of a company) or is entitled to 20% of profit (in case of concern other than a company).
Relative for this purpose includes husband, wife, brother or sister or lineal ascendantor descendent of that individual [ section 2(41)].
Illustration A
Mr. Raja is beneficially holding 21% equity shares of Essem Minerals Pvt. Ltd. Mrs. Raja is employed as Manager (in accounts department) in Essem Minerals Pvt. Ltd. at a monthly salary of Rs. 84,000. Mrs. Raja is not having any knowledge, experience or qualification in the field of accountancy. Will the remuneration (i.e., salary) received by Mrs. Raja be clubbed with the income of Mr. Raja?
**
In this situation, Mr. Raja is having substantial interest in Essem Minerals Pvt. Ltd. and remuneration of Mrs. Raja is not justifiable (i.e., she is employed without any technical or professional knowledge or experience) and, hence, salary received by Mrs. Raja from Essem Minerals Pvt. Ltd. will be clubbed with the income of Mr. Raja and will be taxed in the hands of Mr. Raja.
Illustration B
Mrs. Kumar is beneficially holding 25% equity shares of SM Construction Pvt. Ltd. Mr. Kumar is an architect and he is employed as site observer of one of the construction sites of the SM Construction Pvt. Ltd. at a monthly salary of Rs. 28,400. The remuneration received by Mr. Kumar is justifiable considering his knowledge, experience and qualification. Will the remuneration received by Mr. Kumar be clubbed with the income of Mrs. Kumar because she is having substantial interest in SM Construction Pvt. Ltd.?
**
In this situation, Mrs. Kumar is having substantial interest in SM Construction Pvt. Ltd., but Mr. Kumar is deputed on the basis of his knowledge, experience and qualification and, hence, remuneration paid to him is justifiable. The clubbing provisions of section 64(1)(ii) apply only in a case where spouse is deputed without any technical or professional knowledge or experience. In this case, the remuneration of spouse is justifiable, hence, salary received by Mr. Kumar will not be clubbed with the income of Mrs. Kumar but will be taxed in his hands.
Q.5 Can income from assets transferred to spouse without adequate consideration be clubbed with the income of transferor-spouse?
Ans. As per section 64(1)(iv), if an individual transfers (directly or indirectly) his/her asset (other than house property) to his or her spouse otherwise than for adequate consideration, then income from such asset will be clubbed with the income of the individual (i.e., transferor). Income from transfer of house property without adequate consideration will also attract clubbing provisions, however, in such a case clubbing will be done as per section 27 and not under section 64(1)(iv). The clubbing provisions of section 64(1)(iv) will apply even if the form of asset is changed by the transferee-spouse. There are certain situations in which the clubbing provisions of section 64(1)(iv) are not applicable (refer next FAQ for these situations).
Illustration C
Mr. Soham holds 8,400 debentures of Shyamal Minerals Ltd. He gifted these debentures to his wife. Will the income from debentures be clubbed with the income of Mr. Soham?
**
In this situation, the debentures are transferred to spouse. Transfer is via gift (i.e., without any consideration) and, hence, income generated from the transferred asset, i.e., interest on such debentures will be clubbed with the income of Mr. Soham.
Illustration D
Mr. Kapoor gifted Rs. 8,40,000 to his wife. The said amount is invested by his wife in debenture of a company. Will the income from the debenture purchased by Mrs. Kapoor from gifted money be clubbed with the income of Mr. Kapoor?
**
Rs. 8,40,000 is transferred to spouse. Fund is transferred via gift (i.e., without adequate consideration) and, hence, the provisions of section 64(1)(iv) will be attracted. The provisions of clubbing will apply even if the form of asset is changed by the transferee-spouse.
In this case asset transferred is money and, subsequently, the form of asset is changed to debentures, hence, income from debentures acquired from money gifted by her husband will be clubbed with the income of her husband. Thus, interest on debenture received by Mrs. Kapoor will be clubbed with the income of Mr. Kapoor.
Q.6 Are there any situations in which the clubbing provisions do not apply in case of income from assets transferred to spouse?
Ans. The clubbing provisions of section 64(1)(iv) are not applicable in the following situations:
- If the transfer of asset is for adequate consideration;
- If the transfer of asset is in connection with an agreement to live apart;
- If the asset is transferred before marriage, no income will be clubbed even after marriage, since the relation of husband and wife should exist both at the time of transfer of asset and at the time of accrual of income;
- If on the date of accrual of income, transferee is not spouse of the transferor (i.e. the relation of husband and wife does not exist).
Q.7 Can income from assets transferred to son’s wife without adequate consideration be clubbed with the income of transferor, i.e., father-in-law/mother-in-law?
Ans. As per section 64(1)(vi), if an individual transfers (directly or indirectly) his/her asset to his/ her son’s wife otherwise than for adequate consideration, then income from such asset will be clubbed with the income of the individual (i.e., transferor being father-in-law/mother-in-law). The provisions of clubbing will apply even if the form of asset is changed by the transferee-daughter-in-law.
If the asset is transferred before marriage of son, no income will be clubbed even after marriage, since the relation of father-in-law/mother-in-law and daughter-in-law should exist both at the time of transfer of asset and at the time of accrual of income.
If on the date of accrual of income, the relation of father-in-law/mother-in-law and daughter-in-law does not exist, then the provisions of clubbing will not apply.
Q.8 Can income from assets transferred to any person for the benefit of spouse or for the benefit of son’s wife without adequate consideration be clubbed with the income of transferor?
Ans. As per section 64(1)(vii), if an individual transfers (directly or indirectly) his/her asset otherwise than for adequate consideration to a person or an association of persons for the immediate or deferred benefit of his/her spouse, then income arising from the asset so transferred will be clubbed with the income of transferor.
As per section 64(1)(viii), if any individual transfers (directly or indirectly) his/her asset otherwise than for adequate consideration to a person or an association of persons for the immediate or deferred benefit of his/her son’s wife, then income arising from the asset so transferred will be clubbed with the income of transferor.
Q.9 Is minor child’s income clubbed with the income of parent? |How can parent claim TDS deducted on his minor’s child income?
Ans. As per section 64(1A) , income of minor child is clubbed with the income of his/her parent (*). Income of minor child earned on account of manual work or any activity involving application of his/her skill, knowledge, talent, experience, etc. will not be clubbed with the income of his/her parent. However, accretion from such income will be clubbed with the income of parent of such minor.
Income of minor will be clubbed with the income of that parent whose income (excluding minor’s income) is higher.
If the marriage of parents does not sustain, then minor’s income will be clubbed with the income of parent who maintains the minor.
In case the income of individual includes income of his/her minor child, such individual can claim an exemption under section 10(32)) of Rs. 1,500 or income of minor so clubbed, whichever is less.
(*) Provisions of section 64(1A) will not apply to any income of a minor child suffering from disability specified under section 80U. In other words income of a minor suffering from disability specified under section 80U will not be clubbed with the income of his/her parent.
Illustration F
Mr. Raja has two minor children, viz., Master A and Master B. Master A is a child artist and Master B is suffering from diseases specified under section 80U. Income of A and B are as follows:
- Income of A from stage shows: Rs. 1,00,000
- Income of A from bank interest: Rs. 6,000
- Income of B from bank interest: Rs. 1,20,000.
Will the income of minor children be clubbed with the income of their parent (Mrs. Raja is not having any income)?
**
As per section 64(1A) , income of minor children is clubbed with the income of that parent whose income (excluding minor’s income) is higher. In this case, Mrs. Raja is not having any income and, hence, if any income is to be clubbed then it will be clubbed with the income of Mr. Raja.
Income of minor child earned on account of manual work or income from the skill, knowledge, talent, experience, etc., of minor child will not be clubbed with the income of his/her parent. Thus, income of A from stage show will not be clubbed with the income of Mr. Raja but income of A from bank interest of Rs. 6,000 will be clubbed with the income of Mr. Raja.
Income of a minor suffering from disability specified under section 80U will not be clubbed with the income of his/her parent. Hence, any income of B will not be clubbed with the income of Mr. Raja.
The taxpayer can claim an exemption under section 10(32)). Thus, in respect of interest income of Rs. 6,000 clubbed in the income of Mr. Raja, he will be entitled to claim exemption of Rs. 1,500 under section 10(32)), hence, net income to be clubbed will be Rs. 4,500 (i.e., Rs. 6,000 – Rs. 1,500). Deductee files a declaration with the deductor and the deductor reports the tax deduction in the name of the other person in the information relating to deduction of tax referred to in sub-rule (1) of rule 37BA.
Q.10 Will any clubbing provision apply in case of transfer of asset to Hindu Undivided Family (HUF) by its member?
Ans. As per section 64(2), when an individual, being a member of HUF, transfers his property to the HUF otherwise than for adequate consideration or converts his property into the property belonging to the HUF (it is done by impressing such property with the character of joint family property or throwing such property into the common stock of the family), then clubbing provisions will apply as follows:
Before partition of the HUF, entire income from such property will be clubbed with the income of transferor.
After partition of the HUF, such property is distributed amongst the members of the family. In such a case income derived from such property by the spouse of the transferor will be clubbed with the income of the individual and will be charged to tax in his hands.
Q.11 What is the meaning of clubbing of income?
Ans. Normally, a person is taxed in respect of income earned by him only. However, in certain special cases income of other person is included (i.e. clubbed) in the taxable income of the taxpayer and in such a case he will be liable to pay tax in respect of his income (if any) as well as income of other person too. The situation in which income of other person is included in the income of the taxpayer is called as clubbing of income. E.g., Income of minor child is clubbed with the income of his/her parent. Section 60 to 64 contains various provisions relating to clubbing of income.
Q.12 Do any clubbing provisions exist in case of transfer of income without transfer of asset?
Ans. As per section 60, if a person transfers income from an asset owned by him without transferring the asset from which the income is generated, then the income from such an asset is taxed in the hands of the transferor (i.e., person transferring the income).
E.g., Mr. Raj has given a bungalow owned by him on rent. Annual rent of the bungalow is Rs. 84,000. He transferred entire rental income to his friend Mr. Kumar. However, he did not transfer the bungalow. In this situation, rent of Rs. 84,000 will be taxed in the hands of Mr. Raj.
Q.13 Do any clubbing provisions exist in case of a revocable transfer?
Ans. Revocable transfer is generally a transfer in which the transferor directly or indirectly exercises control/right over the asset transferred or over the income from the asset.
As per section 61, if a transfer is held to be a revocable, then income from the asset covered under revocable transfer is taxed in the hands of the transferor. The provisions of section 61 will not apply in case of a transfer by way of trust which is not revocable during the life time of the beneficiary or a transfer which is not revocable during the lifetime of the transferee.
Can remuneration received by spouse of an individual be clubbed with his/her income?
Under certain circumstances as given in section 64(1)(ii), remuneration (i.e., salary) received by the spouse of an individual from a concern in which the individual is having substantial interest is clubbed with the income of the individual. Provisions in this regard are as follows:
- The individual is having substantial interest in a concern (*).
- Spouse of the individual is employed in the concern in which the individual is having substantial interest.
- The spouse of the individual is employed without any technical or professional knowledge or experience (e.,remuneration is not justifiable).
(*) An individual shall be deemed to have substantial interest in any concern, if such individual alone or along with his relatives beneficially holds at any time during the previous year 20% or more of the equity shares (in case of a company) or is entitled to 20% of profit (in case of concern other than a company).
Relative for this purpose includes husband, wife, brother or sister or lineal ascendantor descendent of that individual [ section 2(41)].
Illustration A
Mr. Raja is beneficially holding 21% equity shares of Essem Minerals Pvt. Ltd. Mrs. Raja is employed as Manager (in accounts department) in Essem Minerals Pvt. Ltd. at a monthly salary of Rs. 84,000. Mrs. Raja is not having any knowledge, experience or qualification in the field of accountancy. Will the remuneration (i.e., salary) received by Mrs. Raja be clubbed with the income of Mr. Raja?
**
In this situation, Mr. Raja is having substantial interest in Essem Minerals Pvt. Ltd. and remuneration of Mrs. Raja is not justifiable (i.e., she is employed without any technical or professional knowledge or experience) and, hence, salary received by Mrs. Raja from Essem Minerals Pvt. Ltd. will be clubbed with the income of Mr. Raja and will be taxed in the hands of Mr. Raja.
Illustration B
Mrs. Kumar is beneficially holding 25% equity shares of SM Construction Pvt. Ltd. Mr. Kumar is an architect and he is employed as site observer of one of the construction sites of the SM Construction Pvt. Ltd. at a monthly salary of Rs. 28,400. The remuneration received by Mr. Kumar is justifiable considering his knowledge, experience and qualification. Will the remuneration received by Mr. Kumar be clubbed with the income of Mrs. Kumar because she is having substantial interest in SM Construction Pvt. Ltd.?
**
In this situation, Mrs. Kumar is having substantial interest in SM Construction Pvt. Ltd., but Mr. Kumar is deputed on the basis of his knowledge, experience and qualification and, hence, remuneration paid to him is justifiable. The clubbing provisions of section 64(1)(ii) apply only in a case where spouse is deputed without any technical or professional knowledge or experience. In this case, the remuneration of spouse is justifiable, hence, salary received by Mr. Kumar will not be clubbed with the income of Mrs. Kumar but will be taxed in his hands.
Q.14 Can income from assets transferred to spouse without adequate consideration be clubbed with the income of transferor-spouse?
Ans. As per section 64(1)(iv), if an individual transfers (directly or indirectly) his/her asset (other than house property) to his or her spouse otherwise than for adequate consideration, then income from such asset will be clubbed with the income of the individual (i.e., transferor). Income from transfer of house property without adequate consideration will also attract clubbing provisions, however, in such a case clubbing will be done as per section 27 and not under section 64(1)(iv). The clubbing provisions of section 64(1)(iv) will apply even if the form of asset is changed by the transferee-spouse. There are certain situations in which the clubbing provisions of section 64(1)(iv) are not applicable (refer next FAQ for these situations).
Illustration C
Mr. Soham holds 8,400 debentures of Shyamal Minerals Ltd. He gifted these debentures to his wife. Will the income from debentures be clubbed with the income of Mr. Soham?
**
In this situation, the debentures are transferred to spouse. Transfer is via gift (i.e., without any consideration) and, hence, income generated from the transferred asset, i.e., interest on such debentures will be clubbed with the income of Mr. Soham.
Illustration D
Mr. Kapoor gifted Rs. 8,40,000 to his wife. The said amount is invested by his wife in debenture of a company. Will the income from the debenture purchased by Mrs. Kapoor from gifted money be clubbed with the income of Mr. Kapoor?
**
Rs. 8,40,000 is transferred to spouse. Fund is transferred via gift (i.e., without adequate consideration) and, hence, the provisions of section 64(1)(iv) will be attracted. The provisions of clubbing will apply even if the form of asset is changed by the transferee-spouse.
In this case asset transferred is money and, subsequently, the form of asset is changed to debentures, hence, income from debentures acquired from money gifted by her husband will be clubbed with the income of her husband. Thus, interest on debenture received by Mrs. Kapoor will be clubbed with the income of Mr. Kapoor.
Q.15 Are there any situations in which the clubbing provisions do not apply in case of income from assets transferred to spouse?
Ans. The clubbing provisions of section 64(1)(iv) are not applicable in the following situations:
- If the transfer of asset is for adequate consideration;
- If the transfer of asset is in connection with an agreement to live apart;
- If the asset is transferred before marriage, no income will be clubbed even after marriage, since the relation of husband and wife should exist both at the time of transfer of asset and at the time of accrual of income;
If on the date of accrual of income, transferee is not spouse of the transferor (i.e. the relation of husband and wife does not exist).
Q.16 Can income from assets transferred to son’s wife without adequate consideration be clubbed with the income of transferor, i.e., father-in-law/mother-in-law?
Ans. As per section 64(1)(vi), if an individual transfers (directly or indirectly) his/her asset to his/ her son’s wife otherwise than for adequate consideration, then income from such asset will be clubbed with the income of the individual (i.e., transferor being father-in-law/mother-in-law). The provisions of clubbing will apply even if the form of asset is changed by the transferee-daughter-in-law.
If the asset is transferred before marriage of son, no income will be clubbed even after marriage, since the relation of father-in-law/mother-in-law and daughter-in-law should exist both at the time of transfer of asset and at the time of accrual of income.
If on the date of accrual of income, the relation of father-in-law/mother-in-law and daughter-in-law does not exist, then the provisions of clubbing will not apply.
Q.17 Can income from assets transferred to any person for the benefit of spouse or for the benefit of son’s wife without adequate consideration be clubbed with the income of transferor?
Ans. As per section 64(1)(vii), if an individual transfers (directly or indirectly) his/her asset otherwise than for adequate consideration to a person or an association of persons for the immediate or deferred benefit of his/her spouse, then income arising from the asset so transferred will be clubbed with the income of transferor.
As per section 64(1)(viii), if any individual transfers (directly or indirectly) his/her asset otherwise than for adequate consideration to a person or an association of persons for the immediate or deferred benefit of his/her son’s wife, then income arising from the asset so transferred will be clubbed with the income of transferor.
Q.18 Is minor child’s income clubbed with the income of parent? |How can parent claim TDS deducted on his minor’s child income?
Ans. As per section 64(1A) , income of minor child is clubbed with the income of his/her parent (*). Income of minor child earned on account of manual work or any activity involving application of his/her skill, knowledge, talent, experience, etc. will not be clubbed with the income of his/her parent. However, accretion from such income will be clubbed with the income of parent of such minor.
Income of minor will be clubbed with the income of that parent whose income (excluding minor’s income) is higher.
If the marriage of parents does not sustain, then minor’s income will be clubbed with the income of parent who maintains the minor.
In case the income of individual includes income of his/her minor child, such individual can claim an exemption under section 10(32)) of Rs. 1,500 or income of minor so clubbed, whichever is less.
(*) Provisions of section 64(1A) will not apply to any income of a minor child suffering from disability specified under section 80U. In other words income of a minor suffering from disability specified under section 80U will not be clubbed with the income of his/her parent.
Illustration F
Mr. Raja has two minor children, viz., Master A and Master B. Master A is a child artist and Master B is suffering from diseases specified under section 80U. Income of A and B are as follows:
- Income of A from stage shows: Rs. 1,00,000
- Income of A from bank interest: Rs. 6,000
- Income of B from bank interest: Rs. 1,20,000.
Will the income of minor children be clubbed with the income of their parent (Mrs. Raja is not having any income)?
**
As per section 64(1A) , income of minor children is clubbed with the income of that parent whose income (excluding minor’s income) is higher. In this case, Mrs. Raja is not having any income and, hence, if any income is to be clubbed then it will be clubbed with the income of Mr. Raja.
Income of minor child earned on account of manual work or income from the skill, knowledge, talent, experience, etc., of minor child will not be clubbed with the income of his/her parent. Thus, income of A from stage show will not be clubbed with the income of Mr. Raja but income of A from bank interest of Rs. 6,000 will be clubbed with the income of Mr. Raja.
Income of a minor suffering from disability specified under section 80U will not be clubbed with the income of his/her parent. Hence, any income of B will not be clubbed with the income of Mr. Raja.
The taxpayer can claim an exemption under section 10(32)). Thus, in respect of interest income of Rs. 6,000 clubbed in the income of Mr. Raja, he will be entitled to claim exemption of Rs. 1,500 under section 10(32)), hence, net income to be clubbed will be Rs. 4,500 (i.e., Rs. 6,000 – Rs. 1,500). Deductee files a declaration with the deductor and the deductor reports the tax deduction in the name of the other person in the information relating to deduction of tax referred to in sub-rule (1) of rule 37BA.
Q.19 Will any clubbing provision apply in case of transfer of asset to Hindu Undivided Family (HUF) by its member?
Ans. As per section 64(2), when an individual, being a member of HUF, transfers his property to the HUF otherwise than for adequate consideration or converts his property into the property belonging to the HUF (it is done by impressing such property with the character of joint family property or throwing such property into the common stock of the family), then clubbing provisions will apply as follows:
- Before partition of the HUF, entire income from such property will be clubbed with the income of transferor.
After partition of the HUF, such property is distributed amongst the members of the family. In such a case income derived from such property by the spouse of the transferor will be clubbed with the income of the individual and will be charged to tax in his hands.
[As amended by Finance Act, 2023]
i purchase a own flat and give on rent 50000/-pm .I want this flat transfer to huf. after transfer that income from rent approx.6,00,000/-will added in my income or huf income for i.tax purpose .pl comment
my father doing business of foodgrains in the name “Rameshwar & Sons”. He purchased cotton seed in my name. I issued a cheque of Rs. 5 lakhs to him. He sold the goods for Rs. 6 lakhs and give me a cheque of Rs. 5.90 Lakhs. Rs. 10,000/- is his commission income. ITO says Rs. 1 lakh is my father’s income. I have no business trade name or sales tax number or foodgrain trading licence etc. Is the ITO correct?
I had transferred my entire equity amounting less than Rs. 1.5 lakhs to my wife in March 2015 and closed my account and stopped investment. My wife had nominal income less than 2.5 lakhs at the time of transfer less than Rs. 20000. My annual income is less than 10 lakhs with investment under 80C less than 1 lakh. If now my wife sells the equity shares after holding more 2 years, then tax implication for me and my wife. Please suggest any solution. The valuation of shares now increased to more than 3 lakhs. Please help.
If parents died,whether minor has to pay tax on income from assets belonged to parents? If yes, who will sign the ROI?
Minor earns interest from Bank. the FD is held jointly with mother.TDS is credited in mothers Account. Mother is not showing in her return as well not taken credit in her return. Whereas the income is included in fathers return as well tax credit is taken. Whether any Dept Notification or decided case is there regarding this matter
I have gifted 1.5 lakh to my wife and she has invested it in her PPF a/c. Will the total interest income from her PPF a/c be added to my income at the time of maturity.
Very good and helpful guide
What is the meaning of adequate consideration.?
wife use to earn more money than husband. she died and property was transfered to her son who was minor that time. now he is major and IT wants to club that time’s income to husbands income of that time in scrutiny. are there any relevant case law or solution?
What is the meaning of clubbing or clubbed the income?
income of individual is clubbed in spouse’s income, then next year the same income is clubbed in whose hands
Dear Sir,
I have kept some fixed deposits in the name of my wife and the Interest earned through FD is Clubbed in my Income and tax paid. But the Bank has deducted the Tax for the Interest income of my wife and it appears in the Form No.26AS also. How can I get the amount refunded from the Income Tax authorities? – V GURURAJAN
TAX GURU SIR
MY WIFE IS GRADUATE AND PARTNER WITH THE FIRM WITH ME , MY SON AND SON’S WIFE (B-TECH). REMUNERATIONS GIVEN TO PARTNERS ARE NOT EQUAL BUT GIVEN TO THEM ARE ACCORDING TO DUTIES AND MUTUALLY AGREE. THE SAME IS WRITTEN IN PARTNERSHIP DEED BEFORE THE START OF YEAR. MY WIFE GIVEN 96000 PA, MYSELF TAKES 36000 PA, MY SON GIVEN 195000 PA, MY SON’S WIFE GIVEN 180000 PA.
WILL THE INCOME OF WIFE’S BE CLUBED IN HUSBAND INCOME. PLEASE ANS.
If a son transfer money to his father account (having no income source) and father put the money in Fixed deposit. whether it is taxable to son.
IF THE ACCOUNTS OF PARENT IN WHICH MINOR’S INCOME IS CLUBBED IS LIABLE TO BE AUDITED AS PER SEC 44AB, WHETHER MINOR WILL ALSO BE CONSIDERED AS AUDITED.
BECAUSE MINOR IS PAYING INTEREST TO SOMEONE AND IF MINOR WILL BE CONSIDERED AS AUDITED MINOR WILL REQUIRE TO DEDUCT TDS.
PLEASE CLARIFY.
Yes , Intrest earned on FD will be taxable in the hands of her husaband.
Assuming Wife herself has made FD out of his own Funds, the said income wouldnt be taxable in the hands of his Husband.
STCG on sale of Share/ bonds would be taxable in MR X’s hand.
if father’s property is separated by two brothers by selling will brothers have to pay tax individually
If husband gives loan to wife and wife makes investment with that money then the income arises is taxable to wife or husband under clubbing of income??
Mr X gifts shares held as long term capital asset to his wife, wife sells the said shares. The the long term capital gains is tax free isince it is exempt. My query what if the sale proceeds are invested in share/bonds will interest received and short term capital gains on sale of share/bonds be taxable in the hands of Mx x or his wife will have the tax liability.
I have kept some fixed deposits in the name of my wife(first name) and me as second name. Will the interest eared on the FDs be clubbed in my income?
Anant
Dear Madam/Sir,
My child is 100% disabled. I had been claiming deduction under section 80 DD to the extent of Rs 100000/-. There are also some FDs in the name of my disabled child under my guardianship. The TDS is deducted against my PAN number. I was not aware that the income of minor, disable child is not clubbed with the parent’s income. So I has been clubbing this income and paying tax. This year I realized that there is an exemption available where in the income of the minor, disable child need not be clubbed with parent’s income. My questions are as below:
1) Since bank has already deducted the TDS for the FDs in my child’s name against my PAN, it is reflecting in my form 26AS. Now if I don’t add the child’s income to my income then there will be a mismatch. How to go about it?
2) The child’s FD interest income is Rs. 178238/- Do we need to file the IT return in child’s name if I don’t add this income to my income?
3) If child’s IT return is filed separately, then will I be eligible for deduction under section 80DD? Or the child will now have to claim deduction under section 80U.
Please help us with our above queries. It will be very helpful.
1.If a person given money to his wife as gift & wife purchase a flat from that money & rent out . Is that rental income is taxable to husband .if yes provide taxable amt after taking deduction & same flat sale out than long term gain is taxable to whome ( Wife / Husband)
2. If person given loan to wife & wife purchase a flat from that money & rent out . Is that rental income is taxable to husband . is wife have to give interest to husband if yes that at what rate.& same flat sale out than long term gain is taxable to whome ( Wife / Husband)
pls. reply asap to file income tax return.
Income is transferred to spouse completely, and thereby spouse invested in Fixed Deposit. Will the Fixed Deposit interest earned by spouse needs to be clubbed?
If a person transfers income without the transfer of asset to his friend
The income shall be clubbed, but in the hands of receiver of such income, can the provisions of gift under head other sources not apply?
what will be the status? if husband and wife both are substantially interested in a company and wife is only getting salary from the company. is the salary recd. by wife will be clubbed with the income of husband? – See more at: https://taxguru.in/income-tax/clubbing-of-income-under-the-income-tax-act-1961.html#sthash.qgVtCsxp.dpuf
May I request for a clarification regarding clubbing of income. I applied for a flat, took two loans and paid EMIs for five years to get possession. The money for EMIs was paid jointly from my salary and from my wife’s salary as a working woman. On retirement, I transferred a large sum to my wife from my retirement benefits to compensate her for her having helped to pay for the house. She invested the money given by me and earns interest. Is this interest income to be clubbed with my taxable income? Isn’t there some provision for this? The money I gave her is rightfully hers and so is the interest.Could you please clrify? Thank you.
If an individual(adult) makes a registration of a land on the name of his mother(senior citizen) so will this property or profit arising from this land shall be clubbed in the hands of an individual or his mother ?
Gift from father to his son (son is not a minor)is clubbing provision applicable to this?
Hi
Thanks for this good post.
If I transfer money (say 5L) to my mother and she purchase guaranteed return shop in her single name (adding her 4L).
For remaining amout I take bank loan as financial guaranteer, she is main applicant and i m 2nd borrower.
Now she is getting per month return and pays emi for bank loan part from that income.
how will tax thing work in this case.
I hope this case shall help many decode tax angle for such situation.
Thanks for support.
If a person transfers the asset to his younger brother who in turn transfer the asset to original transferor’s wife, will the clubbing of income provision still applies.. ? Pls suggest
if husband and wife both are substantially interested in the company and wife is only getting salary from the company. is salary receiving by wife will be clubbed with the income of husband?
what will be the status? if husband and wife both are substantially interested in a company and wife is only getting salary from the company. is the salary recd. by wife will be clubbed with the income of husband?
If Mr. A has given loan to Mrs. D who is wife of Mr.B and Mr. B has given loan to Mrs.C who is wife of Mr. A, than does clubbing provisions attracts in this case?
Please also specify what is the name of this type to transfers under the Income tax Act, 1961?
what should be the tax treatment of interest earned on a fixed deposit, which is on name of minor child and he is now major?
Dear ,
one of my friend purchased a property with the money , out of the proceeds which he received from sale of inherited property, now he want to transer it to HUF , will the income from the property still be taxed under the individual ?/
Recently I have found the following two options for saving tax in addition to 80 C instruments. I want to have clarity on the same how to proceed further to save tax using these options.
Option 1: We can invest in for my Minor Child and get Tax Benefits
Indian tax laws allows me to invest Rs 1,500 per child per month and the income on this money will not be taxed. So it means in a year I can invest Rs 18,000. This is applicable for maximum of two minor children’s.
Option 2: We can gift some money (Rs. 200000/-) to non-working wife. And this amount is tax exempted in the hands of tax payer.
My Question:
I would like to how to use these options for tax savings. I am a salaried person, so can I tell my employer about the two options while declaring the 80 C savings in the starting of the financial. In our company, we don’t have these two options in the 80 C declaration form.
Is there any other way , ie while claiming IT returns can I show theses two options to decrease the taxable income and get the IT returns. If so, where should I fill these two amounts in the IT Saral.
Or can you suggest any other way for the same.
dear gautam, interest income earned shall be clubbed in the income of ur father under sec -64 (1)( iv) of income tax act.
In f.y. 2012-13 , my son has gifted rs. 600000/ to his HUF which was given on loan. While his wife has gifted gold jewellery .Subsequently the jewellery was sold for RS.700000/- (without any capital gain) and the money was given on loan. Will clubbing provision will be applicable on the interest earned by the HUF.
My father has transferred cash to my mother. Mother later on invested the cash in FD’s and earned interest income on the same. Whether the interest income will be clubbed in the income of my father?
An Individual invested in any trust and get interest. He utilised it for the benefit of his son’s son(who is miner).is income clubbed of that person income or not?
Income of an person earning in dubai…he is an NRI…
his money is invested in india by her wife
…
will the return s on the amount be clubbed in the hands of the husband…
are the income earned via dividend and capital gains received by an american who is also a resident of india is taxable in india? -he receives in his profits and income in american bank a/c in usa..
Mr Gandhi,
In case if an individual gift certain Bonds/Shares etc to his Daughter (who is not minor), income earned on the same would be taxed in the hands daughter at the respective slab rates.
In such situations, clubbing provisions do not get attracted.
However, I would advice to contact your CA. with complete details, before you proceed with the prposed gifting transaction.
Regards,
CA. Rajkamal Tiwari
(rajkamal0402@yahoo.com)
If an individual gifts certain bond listed on stock exchange to his daughter who is adult, what are the provisions related to clubbing of income of interest earned by the daughter i.e. donee?
Is clubbing applicable for subsequent years also?
Bhavik,
The spouse whose income is getting clubeed need not file a return, provided he/she do not have other taxable income.
Let’s take a case if Mrs. A has a taxable income of Rs. 5 L and the whole Rs. 5 L is getting clubbed as income of Mr. A by virtue of clubbing provision, as she is not left with any other taxabkle income, she need not file a return.
CA Rajkamal Tiwari
(rajkamal0402@yahoo.com)
Capital gain would arise in the hands of ‘do nee’
I require clarification regarding clubbing provisions. Jewellery received as Gift from “a Relative” on the occassion of marriage. Later when it is sold and capital gains arises whether that Capital Gains will be taxable in the nads of the receipient or to the relative who has gifted at the time of marriage
When income of spouse is being clubbed and accordingly taken into consideration of income of assessee, whether the return of income of assessee needs to be filed whose income is clubbed.