Meaning of relatives​ Under Income Tax Act, 1961

Section 13

Section 13 specifies the circumstances under which the exemption under Section 11 and Section 12 would not be available to trust. These circumstances include the creation of a trust for a particular religious community or caste, application of income for the benefit of the interested person, investment of funds in impermissible mode, etc.

One of the circumstances is -An organisation may lose its exemptions under Section 11 and Section 12 if part of the income is used or applied for the benefit of an interested person, then only such part of the income shall not be considered for the exemption to the trust or institution.

Here, “interested person” means –

(a) The author of the trust or the founder of the institution;

(b) Any person who has made a total contribution up to the end of the relevant previous year of an amount exceeding Rs. 50,000;

(c) Where the author, founder, or substantial contributor is a HUF, a member of the HUF;

(d) Any trustee of the trust or manager of the institution;

(e) Any relative of such author, founder, substantial contributor, member, trustee, or manager as aforesaid; and

(f) Any concern in which any of the persons referred to above has a substantial interest.

Relative in relation to an individual for the purpose of section 13 means:

(a) Spouse of the individual;

(b) Brother or sister (and their spouses) of the individual;

(c) Brother or sister (and their spouses) of the spouse of the individual;

(d) Any lineal ascendant or descendant (and their spouses) of the individual;

(e) Any lineal ascendant or descendant (and their spouses) of the spouse of the individual;

(f) Any lineal descendant of a brother or sister of either the individual or of the spouse of the individual.

Section 56(2)(x)

Section 56(2)(x) is applicable when any person receives from any person any benefit whose value exceeds Rs. 50,000.

Deemed income arises under this provision where any person receives gifts or acquires an immovable property or specified moveable assets without consideration or for inadequate consideration.

The deemed income under this provision arises from the following transactions:

(a) A sum of money received without consideration;

(b) An immovable property received without consideration;

(c) An immovable property received for inadequate consideration;

(d) A specified movable property received without consideration; and

(e) A specified movable property received for inadequate consideration.

Note: This provision is not applicable if any sum of money or property is received from any relative

Relative for the purpose of section 56(2)(x) means:

I. In the case of an individual—

a) spouse of the individual;

b) brother or sister of the individual;

c) brother or sister of the spouse of the individual;

d) brother or sister of either of the parents of the individual;

e) any lineal ascendant or descendant of the individual;

f) any lineal ascendant or descendant of the spouse of the individual;

g) spouse of the person referred to in items (b) to (f).

II. In the case of a HUF – every member of such HUF.

Section 64

Section 64 contains provisions for clubbing of income of another person with the income of the taxpayer.

The clubbing provisions have been introduced to stop taxpayers from diverting a part of their income to relatives to reduce the tax burden.

Section 64(1)(ii) provides that if an individual has a substantial interest in a concern, any income by way of salary, commission, fees, or any other form of remuneration paid to the spouse of the said individual from that concern is included in the total income of such individual.

However, clubbing provisions don’t apply if the remuneration payable to the spouse is attributable to his or her technical or professional qualifications. In this situation, such remuneration is assessable as the personal income, of the earning spouse.

Meaning of Substantial Interest:

Where remuneration is payable by a company – an individual is deemed to have a substantial interest in such company if its equity share capital carrying not less than 20% of voting power is, at any time during the previous year, owned beneficially by such individual either alone or with one or more of his/her relatives.

Where remuneration is payable by a non-corporate entity –an individual is deemed to have a substantial interest therein if he/she, either by self or with one or more relatives, is entitled in the aggregate, at any time during the previous year, to not less than 20% of the profits of such concern.

Relative for the purpose of section 64 means husband, wife, brother, sister, or any lineal ascendant or descendant of an individual.

Section 288

As per Section 288, any assessee who is entitled or required to attend before any income-tax authority or the Appellate Tribunal in connection with any proceeding may attend by an authorised representative.

For the purposes of section 288, “relative” in relation to an individual, means—

(a) spouse of the individual;

(b) brother or sister of the individual;

(c) brother or sister of the spouse of the individual;

(d) any lineal ascendant or descendant of the individual;

(e) any lineal ascendant or descendant of the spouse of the individual;

(f) spouse of a person referred to in clause (b), clause (c), clause (d), or clause (e);

(g) any lineal descendant of a brother or sister of either the individual or the spouse of the individual.