FAQ's

  1. What is the meaning of Clubbing of Income

    : 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.

  2. Do any clubbing provisions exist in case of transfer of income without transfer of asset?

    If a person transfers only the 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). 

  3. Do any clubbing provisions exist in case of a revocable transfer?

    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. 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 

  4. Can remuneration received by spouse of an individual be clubbed with his/her income?

    Under certain circumstances, 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.

  5. What do you mean by individual holding substantial Interest?

    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 a concern other than a company). *Relative for this purpose includes husband, wife, brother or sister or lineal ascendant or descendent of that individual [Section 2(41)]

  6. What are the circumstances under which remuneration received by spouse of an individual is clubbed with his/ her income?

    Remuneration is clubbed under the following circumstances: • 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 (i.e., remuneration is not justifiable).   

  7. Can income from assets transferred to spouse without adequate consideration be clubbed with the income of transferor-spouse?

    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). The clubbing provisionswill apply even if the form of asset is changed by the transferee-spouse.

  8. How is is clubbing of income from transfer of house property different?

    Clubbing provision will apply even in case of transfer of house property for inadequate consideration. The difference being that it is dealt with another section of Income tax Act.

  9. Are there any situations in which the clubbing provisions do not apply in case of income from assets transferred to spouse?

    The clubbing provisions 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 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).  

  10. Can income from assets transferred to son’s wife without adequate consideration be clubbed with the income of the transferor, i.e., father-in-law/mother-in-law?

    If an individual transfer (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. 

  11. 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?

    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.

  12. Is minor child’s income clubbed with the income of parent? How can parent claim TDS deducted on his minor’s child income?

    : 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. (*) Income of a minor suffering from disability specified under Section 80U will not be clubbed with the income of his/her parent.

  13. Will any clubbing provision apply in case of transfer of asset to Hindu Undivided Family (HUF) by its member?

    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.

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