CA Nisha Pariyani


  • Generally person is liable to pay tax only on the income which is earned by him.
  • However provisions of Section 60 to 64 of Income Tax Act 1961 may make you liable to pay tax on income which is not earned by you…
  •  Inclusion of others income in the income of assessee is called“Clubbing of income” and such clubbed income is termed as “Deemed Income”.

Following acts of yours will attract the provision of Sec 60:

  1. You owns an asset.
  2. Asset is not transferred by You.
  3. You transfers the income earned from such assets to any person.

Section 61: Revocable Transfer Of Assets

Mr. X transfers house Property to his friend Mr.Y for SEVEN YEARS. Here the transfer is revocable after seven years and therefore, the  income from House Property will be clubbed with the income of Mr.X.

Section 62: Irrevocable Transfer Of Assets

Where an asset is transferred to ANY PERSON:

  1. By way of trust which is not revocable during the lifetime of the beneficiaries, or
  2. In the case of any other transfer ,which is not revocable during the lifetime of the transferee

then all income arising from such asset shall be clubbed in the income of the transferee subject to transferors derives no direct or indirect benefit from such income in either case.

E.g.: Mr. A transfers his house property to Mr. B for the lifetime of Mr. B. The transfer is irrevocable and the income from HP from the date of trf. shall be included in the income of Mr. B. On the death of Mr. B, the income from HP shall be included in income of Mr. A from the date of death. The income shall be included in income of Mr. A even if Mr. A does not revoke the transfer on the death of Mr. B (because law says income shall be included in transferor’s income as and when power to revoke arises to transferor.”ACTUAL REVOCATION IS NOT RELEVANT”


The following incomes of the spouse of an individual shall be included in the total income of the individual:

a.Remuneration from a concern in which spouse has substantial interest [section 64 (1) (ii)]:
—If the following conditions are fulfilled this section becomes applicable:—
  •  If spouse of an individual gets any salary, commission, fees etc (remuneration) from a concern.
  •  The individual has a substantial interest in such a concern.
  • The remuneration paid to the spouse is not due to technical or professional knowledge of the spouse.

Then such salary, commission, fees, etc shall be considered as income of the individual and not of the spouse.

—Illustration – Mr. He has a substantial interest in A Ltd. and Mrs. She is employed by A Ltd. without any technical or professional qualification to justify the remuneration. In this case, salary income of Mrs. She shall be taxable in the hands of Mr. He

When both husband and wife have substantial interest

Where both the husband and wife have a substantial interest in a concern and both are in receipt of the remuneration from such concern both the remunerations will be included in the total income of husband or wife whose total income, EXCLUDING SUCH REMUNERATION, IS GREATER..

**Special comment: where such income is once included in the total income of either spouse, any such income arising in the subsequent year will not be included in the total income of other spouse unless the A.O is satisfied after giving that spouse an opportunity of being heard that it is necessary to do so.

*Concern means any form of business or professional concern. It could be a sole proprietor, partnership, company, etc.

*Substantial interest An individual is deemed to have substantial interest, if he /she (individually or along with his relatives) beneficially holds equity shares carrying not less than 20 per cent voting power in the case of a company or is entitled to not less than 20 percent of the profits in the case of a concern other than a company at any time during the previous year.

b. Income from ASSETS TRANSFERRED to spouse [section 64(1) (iv)]

Income from assets transferred to spouse becomes taxable under provisions of  section 64 (1) (iv) as per following conditions:-

v He/she has transferred an asset (other than a house property*) to his/her spouse
v The asset is transferred without adequate consideration. Moreover there is no agreement to live apart.

If the above conditions are satisfied, any income from such asset shall be deemed to be the income of the taxpayer who has transferred the asset.

* In case of House Property Section 27 applies.

**Special Comment: The relationship of husband and wife must exist both at the time of transfer of assets and at the time when income accrues in for the applicability of clubbing provisions.

Illustration – Mr. He transfers 500 debentures of IFCI to his wife without adequate consideration.

Interest income on these debentures will be included in the income of Mr. He.


ü If assets are transferred before marriage.
ü If assets are transferred for adequate consideration.
ü If assets are transferred in connection with an agreement to live apart.
ü If on the date of accrual of income, transferee is not spouse of the transferor.
ü If property is acquired by the spouse out of pin money (i.e. an allowance given to the wife by her husband for her dress and usual household expenses).

In the aforesaid five cases, income arising from the transferred asset cannot be clubbed in the hands of the transferor.

To Read more Download PPT – DOWNLOAD

More Under Income Tax

Posted Under

Category : Income Tax (25883)
Type : Articles (15307)
Tags : Income Tax Tips (77)

0 responses to “PPT on Clubbing of Income Under the Income Tax Act,1961”


    Please rectify 1st line of Section 61 Mr.X to his friend Mr.X

Leave a Reply

Your email address will not be published. Required fields are marked *