CLUBBING OF INCOME

SUBMITTED TO : MISS NAVDEEP KOUR

TAXATION LAW
SUBMITTED BY :
HITESH KASHYAP
17001295
BA.LLB 9th SEMESTER
 Clubbing of income

 Generally an assessee is taxed in respect of his own income.but sometimes in some

Exceptional circumstances this basic principle is deviated and the assessee May be
taxed in respect of income which legally belongs to somebody else.
 Earlier the taxpayers made an attempt to reduce their assets in favor of their family
members or By the arranging their source of income in such a way that tax incidence
falls on other whereas benefits of income Is derived by them.
 So to counteract such practices of tax avoidance, necessary provision have been
incorporated in section 60 to 64 of the income tax Act hence , a person is liable to
pay tax on his own income as well As income belonging to others on fulfillment of
certain conditions. Inclusion of others income in the income of the assessee is called
clubbing of income and the income which is so included is called deemed income.
 OBJECTIVE OF CLUBBING OF INCOME

 Circumstances when income of some other person is included in the income of assessee.

 Provision when these sections will be applicable.

 Under what head and in whose income it with be included.

 TRANSFER OF INCOME WITHOUT
TRANSFER OF ASSET {SEC.60}
 Section 60 is applicable if the following conditions are satisfied:-
 The taxpayer owns an asset.
 The ownership of asset is not transferred by him.
 The income from the asset is transferred to any person under a settlement, trust, convenant,
Agreement or arrangement.
 The above transfer maybe revocable or may not be revocable.
 The above transfer maybe affected at any time.

 If above conditions are satisfied ,INCOME FROM THE ASSET TAXABLE IN THE HANDS OF
TRANSFEROR
 REVOCABLE TRANSFER OF ASSETS
{SEC 61}
 If an asset is transferred under a “revocable transfer” , income from such asset is taxable in
the hands of the transferor. The transfer for this purpose includes any settlement, trust
convenant agreement or arrangement.
 In any of the following cases transfer is treated as “revocable transfer”–
i. If an asset is transferred under a trust and it is revocable during the lifetime of the
beneficiary.
ii. If an asset is transferred to a person and it is revocable during the lifetime of transferee
iii. If an asset is transferred before April 1 and it is revocable within six year.
iv. If the transfer contains any provision to re-transfer the asset to the transferor directly
v. If the transferor has any right to reassume.
 AN INDIVIDUAL ASSESSABLE IN
RESPECT OF REMUNERATION OF
SPOUSE {sec.64(1)(ii)}
 Section 64(1)(ii) is applicable if the following conditions are satisfied :-
 The taxpayer is an individual
 He/she has a substantial interest in a concern.
 Spouse of the taxpayer is employed in the above mentioned concern.
 Spouse is employed in the concern without any technical or professional knowledge or
experience
 Concern – concern could be any form of business or professional concern. It could be sole
proprietor, partnership , company , etc.
 Relatives – relatives in relation to an an individual means the husband , wife, brother, or sister
 Contd…..

 Substantial interest :- An individual is deemed to have substantial interest if he/she

beneficially holds equity shares carrying not less than 20 percent 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.
 When both husband and wife have substantial interest :- in a concern and both are employed
by the concern without professional qualifications, remuneration will included in the total
income of husband or wife whose total income excluding such remuneration is greater
 INCOME FROM ASSETS TRANSFERRED TO
SPOUSE {SEC (64)(iv)}
 The taxpayer is an individual.
 He/she has transferred an asset ( other than a house property)
 The asset is transferred to his/her spouse.
 The asset is transferred otherwise than (a) for adequate consideration or (b) in connection
with an agreement to live apart.
 The asset may held by the transferee spouse in the same form or in a different form.
 SECTION 64 IS NOT APPLICABLE
FOLLOWING CASES :-

 If assets are transferred before marriage.

 If assets are transferred for adequate consideration.
 If assets are transferred in consideration with an agreement to live apart.
 If property is acquired by the spouse out of pin money ( eg. An allowance given to the wife by
her husband for her dress and usual household expenses.
 If on the date of accrual of income transferee is not spouse of the transferor.
 INCOME FROM ASSETS TRANSFERRED TO A
PERSON FOR THE BENEFITS OF SPOUSE {SEC.
64 (1)(vii)}

 Income from the assets transferred to a person for the benefit of the spouse attract
the provision of the section 64 (1)(vii) On clubbing of income if.
 The taxpayer is the individual.
 He/she has transferred an assets to a person or an association of persons.
 Transfer may be direct or indirect.
 Asset is the transferred for the immediate or deferred benefit of his/her spouse.
 The transfer of assets is without adequate consideration.
 INCOME FROM ASSETS TRANSFERRED TO
PERSON FOR THE BENEFITS OF SONS’S
WIFE {SEC.(1)(viii)}
 Income from the essence transferred to a person for the benefit of the sons wife attract the
provisions of section 64(1)(viii) On clubbing of income if.
 The taxpayer is individual.
 He or she has transferred an assets after.
 The asset is transferred to any person or association of persons.
 Transfer maybe direct or indirect.
 The assets is transferred for the immediate or deferred benefit of his/her sons wife.
 The exit is transferred otherwise done for adequate consideration.
 INCOME OF MINOR CHILD {SEC.64(1A)}

 All income which arises or accrues to the minor child shall be clubbed in the income of his
parent section 64 (1A) who is total income excluding minors income is the greater however in
case parents are separated the income of the minor will be included in the income of that
parent who maintains the minor child in the relevant previous year.
 When clubbing is not attracted the following income will be taxable in the hand of the minor
child.
 Income of minor child from All source suffering from any disability of the nature specified
under section 80u.
 Income of minor child an account of any manual work.
 Income of minor child on account of any activity involving application of his skill, talent or
specialized Knowledge and experience.
 EXEMPTION UNDER SEC. 10(32)

In case the income of an individual includes the income of his/her minor child income of about
provision such an individual shall be entitled to exemption of RS 1500 in respect of each minor
child .where , however, the income of any minor so include the bill is less than Rs 1500 the
Aforesaid exemption shall be restricted to the income so included in the total income of
individual.
 TAX IMPLICATIONS OF CONVERSION OF SELF ACQUIRED
PROPERTY INTO JOINT FAMILY PROPERTY AND SUBSEQUENT
PARTITIONS SEC. 64(2)

 The following transactions are covered by section 64(2).

 Case 1 :- number one where an individual being member of Hindu undivided family converts
after this song after his self acquired property into property belonging to the family. It is done
by impressing such property with the character of joint family property or following such
property into common stock of the family.

 Case 2 :- when such individual transfers his self acquired property, directly or indirectly to the
other family otherwise then for adequate consideration.
 OTHER POINTS :-

 Income from is Accretion of property transferred :- In this case income arising to the transfer
free from the property transferred is taxable in the hands of transfer. Income arising to the
transferee from the accretion of such property or from accumulated income of such property
is however not included in the total income of the transfer.
 CAN NEGATIVE INCOME BE CLUBBED

 If clubbing provision are applicable and income from such a source is negative it will we still be
gloved in the income of Assessee.
 Consider the following cases.
 Mr. X gifts Mrs.RS 2 lakhs from which she Starts a business. Now as per clubbing provision
what ever is the profit from this business it will be taxable in the hand of the Mr. X since it is
an income taxable under the head of profit and again of business and profession that is why it
will be taxable under the same head and income will be calculated as if it is the business of
Mr. X.
 Minor son of Suresh has a business for previous year 2014 to 2015 loss from business is Rs
50,000.The loss of 50,000 will be included in the income of Suresh or Mrs. Suresh whosever
has higher income.
THANK YOU