CLUBBING OF INCOME
14 April 2024 09:48
DEFINATION
○ Clubbing means when income of a person is added in the total of income of other person (generally
transferor)
○ When such income is added in transferor's income it will be added in the same head to which such
income belongs.
○ Not only income , however losses are also clubbed.
SEC. 60 Transfer of income without transfer of asset
If only income is transferred, without transfer of asset , then such income is to be clubbed in the hands of
transferor.
SEC. 61 Revocable transfer of asset
If any asset is transferred on revocable terms, then income from such assets , shall be clubbed in the hands
of transferor.
SEC. 62 Exception to sec. 61
○ If any asset is transferred on revocable terms, however the revocation cannot be exercised before the life
time of the transferee , then income from such transferred asset shall not be clubbed.
○ Provided the transferor does not derive any direct or indirect benefit.
SEC. 63 Meaning of revocable transfer
Revocable transfer means , when the transferor has right to take back the asset or if there is any provision
in the agreement which gives right to the transferor to get back the asset.
SEC.64 Provisions related to spouse, son's wife, HUF and minor
child
PROVISION RELATED TO SPOUSE
1. REMUNARATION TO SPOUSE
○ If the spouse is receiving remuneration from the concerned where the individual has substantial
interest, then such remuneration shall be clubbed in the hands of the individual.
○ In case the remuneration is justified, because the spouse has adequate skills, competence or
qualification then do not club such remuneration.
○ If both husband and wife have substantial interest and they are receiving remuneration without any
Experience/competence/ skills , then such Remuneration shall be clubbed in the hands of that
individual whose income before such clubbing is higher.
substantial interest means
- having more than 20% of voting power whether individually or along with relatives in such concern
*relatives means - spouse, father ,mother, bro, sis, lineal ascendent/ descendant
2. ASSET TRANFERRRED TO SPOUSE
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- having more than 20% of voting power whether individually or along with relatives in such concern
*relatives means - spouse, father ,mother, bro, sis, lineal ascendent/ descendant
2. ASSET TRANFERRRED TO SPOUSE
○ Income arising from transfer of any asset without adequate consideration shall be clubbed in the
hands of transferor. Living apart is considered as adequate consideration.
○ Clubbing provisions will not apply if a house is transferred, because here the concept of deemed
ownership (section 27) will apply.
○ If the transferred asset changes form or shape then it does not matter and clubbing provisions will
apply.
○ Income arising from club Income shall not be clubbed.
3. CAPITAL INVESTED IN SPOUSE BUSINESS
The profit arising from such business shall be clubbed in the hands of transfer in the following proportion
Similar provisions will apply in case of son’s wife also
INCOME FROM MINOR CHILD
○ All income arising to a minor child (including minor married daughter) shall be clubbed in the
hands of that parent whose income before such clubbing is higher.
○ In case of single parent, income shall be clubbed in the hands of that parent.
○ Whenever income of minor child will be clubbed then an exemption of Rs.1500 per child shall be
given. (Such provisions will not apply in case of new taxation regime)
○ Following income of minor child shall not be clubbed
-Income from manual labour
-Income from specialised knowledge, talent or experience
-Income of a minor child who is disable
TRANSFER OF SELF ACQUIRED PROPERTY TO HUF
○ If an individual transfers his self-acquired property to his HUF, then income from such transferred
asset shall also be clubbed.
○ But after partition of HUF, only the share which is related to him and his spouse shall only be
clubbed.
CROSS TRANSFER
If two transactions are interconnected and are part of the same transaction in such away
To evade the tax , then the clubbing provision will apply
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*Common amount will be clubbed i.e. 10 lac will be clubbed
In above example, in case, if Mr. A is transferring 8lac worth debentures
then 8 lac will be clubbed
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