'Its all in the family'. It may seem ordinary to
invest money for a non earning spouse by way of fixed deposits, or other income
earning assets or to set up bank accounts, mutual funds or other investments
for children to provide for their needs in future. Usually, you are only taxed
for your own income, but under certain special circumstances some incomes are
'clubbed' along with your income and you may be liable to pay tax on such
clubbed income.
The intention here is to make sure there is no tax that escapes,
in case an individual is moving assets or incomes in the family. In a situation
where you have incurred a loss, such loss (wherever allowed to be adjusted
against an income) is also not allowed to be transferred to anyone and will be
'clubbed' to your income.
Let's understand in what circumstances you may attract this
'clubbing' of income -
In the case of Assets Transfer to Anyone
Transfer of Income - no transfer of assets: When
you retain the ownership of an asset but decide to transfer its income by doing
an agreement or any other way, the Act will still consider that income as your
income and it will be added to your total income for taxation purposes.
Transfer of Asset - which is revocable: When
you transfer the ownership of an asset and make such transfer revocable, income
from such an asset will continue to be added to your income.
Clubbing of Spouse's Income
Here are some situations when your spouse's income will get
clubbed to your income and you'll have to pay tax on it-
(1) Your spouse receives
a salary from a company or a firm in which you have a
substantial interest, then such salary will be clubbed with your income.
Substantial Interest means you alone or with your relatives (husband, wife,
brother, sister or your lineal ascendant or descendant) hold equity or voting
power of a company which is 20% or more. Or in case of a firm you are entitled
to 20% or more of the profits. Also, if both of your receive an income from
such a firm or company, it will get taxed in the hands of the person whose
taxable income is higher. There is one exception to this - if your spouse
receives the salary due to his/her application of technical or professional
knowledge & experience then such salary will be taxed in the hands of the
person receiving it and not clubbed.
(2) You transfer
an asset to your spouse directly or indirectly without
receiving adequate consideration (does not include where asset is transferred
as part of a divorce settlement) - income from this asset will be clubbed with
your income. For example – where the husband to reduce his tax liability
transfers an asset worth Rs 1,00,000 to his wife for Rs 25,000 .3/4th of
the income from this asset will be taxed in the hands of the husband. If he
receives no consideration, in that case the entire income from this asset will
be clubbed with the husband's income. Although the clubbing provisions here
exclude house property - but in case you transfer a house property to your wife
and do not receive adequate consideration, as per the Act, you will still be
considered the 'deemed owner' and the income from the asset will be clubbed
with your income.
(3) You transfer
an asset to a person or an association of persons,
directly or indirectly, without adequate consideration, so that the benefit
arises to your spouse either now or on a deferred basis, income from such an
asset will be clubbed with your income.
(4) Assume a situation where you provide money to
your spouse (who is non working) and that money is invested by the spouse and a
certain income is generated (from such money that you gave your spouse).The
income that arises from such investment done by her can be clubbed to your
income. However, if your spouse reinvests the income portion and earns further
income then such income may not be clubbed with your taxable income.
Clubbing of Income of Minor Child (less than 18 years old)
(1) Some families make fixed deposits in the name of a minor
child. Income of a minor is taxable in the hands of the parent whose total income
is higher (before including the minor's income). If the parents are divorced it
is clubbed with the person who is maintaining the child. There is one exception
to this rule - if the minor has earned an income because of his own manual
work, or used his talent or specialized knowledge & experience OR in case
of a minor who is disabled (based on definition of disability in Section 80U)
and earns an income, such income will not be clubbed.
(2) When your minor child's income is clubbed to your income -
exemption is available up to Rs 1500 for each such minor child. Which means if
clubbed income is more than Rs 1500, Rs 1500 is the maximum exemption, however
if clubbed income is say Rs 800 (less than Rs 1500) exemption is limited up to
such lesser amount, Rs 800 in this case.
Clubbing of Income of a Major Child (18 or more than 18 years
old)
You may be giving over some money to your major child (who may
not be earning), in this case if the major child invests that money - any
income from these investments will not be taxable in your hands but will be
taxed in the hands of the major child. So therefore, there will be no clubbing
of income in case of a major child.
Clubbing of Income of a Son's Wife
You transfer an asset to your son's wife directly or indirectly without
receiving adequate consideration – income from this asset will be clubbed with
your income. Or you transfer an asset to a person or AOP, for the immediate or
deferred benefit of your son's wife, without adequate consideration, directly
or indirectly - income from this asset will be clubbed with your income
Full Section Wise Detail
Clubbing of income means Income of other person included in assessee’s
total income, for example: Income of husband which is shown to be the income of
his wife is clubbed in the income of Husband and is taxable in the hands of the
husband. Under the Income Tax Act a person has to pay
taxes on his income.
A person cannot transfer his income or an asset which is his one of
source of his income to some other person or in other words we can say that a
person cannot divert his income to any other person and says that it is not his
income. If he do so the income shown to be earned by any other person is
included in the assessee’s total income and the assessee has to pay tax on it.
SECTION
|
NATURE OF TRANSACTION
|
CLUBBED IN THE
HANDS OF |
CONDITIONS/
EXCEPTIONS
|
RELEVANT REFERENCE
|
60
|
Transfer of Income without transfer of Assets.
|
Transferor who transfers the income.
|
Irrespective of:
1. Whether such transfer is revocable or not. 2. Whether the transfer is effected before or after the commencement of IT Act. |
1. Income for the purpose of Section 64 includes
losses. [P. Doriswamy Chetty 183 ITR 559 (SC)] [also
see Expl. (2) to Section 64]
2. Section 60 does not apply
if corpus itself is transferred. [Grandhi Narayana Rao 173 ITR 593 (AP)] |
61
|
Revocable transfer of Assets.
|
Transferor who transfers the Assets.
|
Clubbing not applicable if: 1. Trust/transfer irrevocable during the
lifetime of beneficiaries/transferee or2. Transfer made prior to 1-4-1961 and
not revocable for a period of 6 years.Provided the transferor derives no
direct or indirect benefit from such income in either case.
|
Transfer held as revocable
1. If there is provision to re-transfer directly or indirectly
whole/part of income/asset to transferor;
2. If there is a right to reassume power, directly or indirectly, the
transfer is held revocable and actual exercise is not necessary.
[S. Raghbir Singh 57 ITR 408 (SC)]
3. Where no absolute right is
given to transferee and asset can revert to transferor in prescribed circumstances, transfer is held revocable. [Jyotendrasinhji vs. S. I. Tripathi 201 ITR 611 (SC)] |
64(1)(ii)
|
Salary, Commission, Fees or remuneration paid to spouse from a concern
in which an individual has a substantial* interest.
|
Spouse whose total income (excluding income to be clubbed) is greater.
|
Clubbing not applicable if:Spouse possesses technical or professional
qualification and remuneration is solely attributable to application of that
knowledge/qualification.
|
1. The relationship of husband and wife must subsist at the time of
accrual of the income. [Philip John Plasket Thomas 49 ITR 97 (SC)]
2. Income other than salary,
commission, fees or remune- ration is not clubbed under this clause |
64(1)(iv)
|
Income from assets transferred directly or indirectly to the spouse
without adequate consideration.
|
Individual transferring the asset.
|
Clubbing not applicable if, The assets are transferred;
1. With an agreement to live apart.
2. Before marriage.
3. Income earned when relation does not exist.
4. By Karta of HUF gifting co-parcenary property to his wife.
L. Hirday Narain vs. ITO 78 ITR 26 (SC)
5. Property acquired out of pin money. [R.B.N.J. Naidu vs. CIT
29 ITR 194 (Nag.)] |
1. Income earned out of Income arising from transferred assets not
liable for clubbed.
[M.S.S. Rajan 252 ITR 126 (Mad)]2. Cash gifted to spouse and he/she invests to earn interest. [Mohini Thaper vs. CIT 83 ITR 208 (SC)]3. Capital gain on sale of property which was received without consideration from spouse [Sevential M. Sheth vs. CIT 68 ITR 503 (SC)]4. Transaction must be real. [O.N. Mohindroo 99 ITR 583 (Delhi)] |
64(1)(vi)
|
Income from the assets transferred to son’s wife.
|
Individual transferring the Asset.
|
Condition:
The transfer should be without adequate consideration. |
Cross transfers are also covered
[C.M.Kothari 49 ITR 107 (SC)] |
64(1)(vii),(viii)
|
Transfer of assets by an individual to a person or AOP for the
immediate or deferred benefit of his:
(vii) – Spouse. (viii) – Son’s wife. |
Individual transferring the Asset.
|
Condition:
1. The transfer should be without adequate consideration.
|
1. Transferor need not necessarily have taxable
income of his own. [P. Murugesan 245 ITR 301 (Mad)]2. Wife means legally wedded wife. [Executors of the will of T.V. Krishna Iyer 38 ITR 144 (Ker)] |
64(1A)
|
Income of a minor child [Child includes step child, adopted child and
minor married daughter].
|
1. If the marriage subsists, in the hands of the parent whose total
income is greater; or;
2. If the marriage does not subsist, in the hands of the person who
maintains the minor child.
3. Income once included in the total income of either of parents, it
shall continue to be included in the hands of some parent in the subsequent
year unless AO is satisfied that it is necessary to do so (after giving that
parent opportunity of being heard)
|
Clubbing not applicable for:—
1. Income of a minor child suffering any disability specified u/s.
80U.
2. Income on account of manual work done by the minor child.
3. Income on account of any activity involving application of skills,
talent or specialized knowledge and experience.
|
1. Income out of property transferred for no consideration to a minor
married daughter, shall not be clubbed in the parents’ hands. [Section 27]2. The parent in whose hands the minor’s income is clubbed is entitled to an exemption up to Rs. 1,500 per child. [Section 10(32)] |
64(2)
|
Income of HUF from property converted by the individual into HUF
property.
|
Income is included in the hands of individual & not in the hands
of HUF.
|
Clubbing applicable even if:
The converted property is subsequently partitioned; income derived by the spouse from such converted property will be taxable in the hands of individual. |
Fiction under this section must
be extended to computation of income also. [M.K. Kuppuraj 127 ITR 447 (Mad)] |
* An individual shall deemed to have substantial interest in a concern
for the purpose of Section 64(1)(ii)
IF THE CONCERN IS A COMPANY
|
IF THE CONCERN IS OTHER THAN A
COMPANY
|
Person’s beneficial shareholding should not be less than 20% of voting
power either individually or jointly with relatives at any time during the
Previous Year. (Shares with fixed rate of dividend shall not be considered)
|
Person either himself or jointly with his relatives is entitled in aggregate
to not less than 20% of the profits of such concern, at any time during the
previous year.
|
Note :The clubbed income retains the same head under which it is earned.
Clubbing of Income के इन प्रावधानों के बारे में नहीं पता तो हो सकती आपकी इनकम के कैलकुलेशन में गलती।
Clubbing of Income – सामान्य रूप से करदाता को अपनी इनकम पर टैक्स देना होता है, लेकिन कई बार करदाता अपनी टैक्स
Liability को कम करने के लिए अपनी इनकम का कुछ हिस्सा या कोई सम्पति जिससे इनकम होती है, अपने जीवनसाथी या minor Child को Transfer कर देता है ।
ऐसी परिस्थतियों से बचने के लिए इनकम टैक्स एक्ट में
Clubbing of Income के प्रावधान लागू किये गये है ।
Clubbing of Income के प्रावधानों के अनुसार कुछ विशेष परिस्थतियों में किसी अन्य पर्सन की इनकम करदाता की Total
Income में शामिल की जायेगी और करदाता उस इनकम पर टैक्स देने के लिए उत्तरदायी है ।
Let’s
Understand Circumstances Which Attract Clubbing of Income Provision of Income
Tax Act –
·
Transfer of Income Without Transfer of Assets –
यदि कोई Individual सम्पति को
Transfer किये बिना उससे होने वाली इनकम को ट्रांसफर करता है, तो ऐसी स्थिति में इनकम Transferor की Total Income में शामिल की जायेगी । ऐसी स्थिति में ट्रांसफर के
Revocable या Irrevocable होने से कोई फर्क नहीं पड़ेगा । For
Example-
श्रीमान A ने प्रॉपर्टी को ट्रांसफर किये बिना, उससे होने वाली किराये की Income को अपनी वाइफ को ट्रांसफर कर दिया, ऐसी स्थिति में किराये की Income श्रीमान A की Total Income में Clubbed की जाएगी । यानि कि
Clubbing of Income के Provision लागू होंगे।
·
Income Arising From Revocable Transfer of Assets –
किसी सम्पति का Revocable ट्रांसफर किया जाता है, तो उस सम्पति से होने वाली इनकम
Transferor की Total Income में Clubbed की जाएगी ।
Revocable ट्रांसफर तब माना जाता है, जब Transferor को सम्पति या इनकम के सम्पूर्ण या किसी भाग को Direct
या Indirect रूप से पुनः ट्रांसफर का कोई प्रावधान हो अथवा अधिकार को पुनः स्थापित करने का अधिकार दिया गया है । लेकिन अगर सम्पति का Revocable ट्रांसफर Beneficiary/Transferee के जीवनकाल में रद्द नहीं हो तथा
Transferor उस इनकम से Direct या Indirect कोई लाभ प्राप्त नहीं करता, तो यह Revocable ट्रांसफर नहीं माना जायेगा और इनकम को
Transferee की इनकम माना जायेगा।
·
Income By Way of remuneration From a Concern In Which The
Individual Has Substantial Interest-
किसी ऐसे संस्थान जिसमे Individual का पर्याप्त हित हो, से उसके जीवनसाथी को
Salary, Commission, Fees or Any Other Form of Remuneration (Cash Or Kind ) प्राप्त होता है ,तो इस प्रकार की इनकम को
Individual की Total Income में शामिल किया जायेगा । लेकिन यह प्रावधान लागू नहीं होगा, जहाँ पर जीवनसाथी के पास तकनीकी या पेशेवर योग्यता हो और उसे इन्ही के आधार पर इनकम प्राप्त होती है, तो ऐसी स्थिति में इनकम जीवनसाथी के हाथों में टैक्सेबल होगी ।
कुछ परिस्थतियों में Husband और Wife दोनों का संस्थान में पर्याप्त हित होता है और दोनों को संस्थान से Remuneration प्राप्त होता है, तो इस प्रकार की इनकम को उस जीवनसाथी की इनकम में शामिल किया जायेगा, जिसकी इनकम ज्यादा होगी ( Remuneration की इनकम को शामिल किए बिना ) ।
कोई Individual किसी संस्थान में पर्याप्त हित रखने वाला तब माना जायेगा , जब वह Previous Year में किसी भी समय अकेले या अपने Relatives के साथ मिलकर –
– यदि संस्थान कंपनी है, तो कंपनी में 20 % या अधिक मताधिकार वाले Equity Shares का Beneficial Owner है अथवा,
– किसी अन्य मामले में संस्थान के लाभ का न्यूनतम 20 % का अधिकारी हो ।
·
Income Arising To The Spouse From An Assets Transferred Without Adequate
Consideration –
जीवनसाथी को Direct या Indirect रूप से किसी सम्पति , जो कि अलग रहने के समझौते के सम्बन्ध में अथवा पर्याप्त प्रतिफल के अतिरिक्त है, का ट्रांसफर है, तो ऐसी सम्पति से होने वाली इनकम को Transferor की कुल आय में शामिल किया जायेगा ।
परन्तु ऐसी इनकम से होने वाली इनकम को Transferor की कुल में शामिल नहीं किया जायेगा एवं ऐसी इनकम Transferee की कुल आय में शामिल की जायेगी ।
·
Income From Assets Transfer To Son’s Wife –
जब सास अथवा ससुर द्वारा अपनी पुत्रवधू को पर्याप्त प्रतिफल के बिना किसी एसेट्स को Transfer किया जाता है, तो ऐसी एसेट्स से होने वाली इनकम Transferor (सास अथवा ससुर) की इनकम मानी जायेगी, लेकिन ऐसा तभी माना जाएगा जब सास और ससुर का पुत्रवधु से रिलेशन एसेट्स को Transfer और इनकम होने पर, दोनों समय विधमान हो ।
·
Transfer of Assets For The Benefit of The Spouse or Son’s Wife –
Individual द्वारा Direct या Indirect रूप से पर्याप्त प्रतिफल के बिना किसी पर्सन या AOP को एसेट्स Transfer की जाती है एवं ऐसी एसेट्स से Transferee को इनकम होती है, तो ऐसी इनकम उस Individual की इनकम में उस सीमा तक शामिल की जाएगी, जिस सीमा तक इनकम को Transferee द्वारा Transferor के जीवनसाथी या Son’s Wife के तुरंत अथवा deferred Benefit के लिए Use किया जाता है ।
·
Clubbing of Minor’s Income –
Minor को होने वाली सभी इनकम उसके Parents की इनकम में शामिल की जायेगी । यह इनकम उस Parents की इनकम में शामिल की जाएगी, जिसकी कुल इनकम Minor की इनकम शामिल किये बिना अधिक है । हालाँकि जिस Parents की इनकम में Minor की इनकम शामिल की जाती है , उसे सेक्शन 10 (32 ) में ₹ 1500 प्रति बच्चा की Maximum छूट प्राप्त होगी ।
लेकिन कुछ Cases में Minor की इनकम Club नहीं की जाती है , For Examples –
1. यदि इनकम Minor Child के Manual Efforts से प्राप्त हो, या
2. इनकम Minor Child की कुशलता, योग्यता, अथवा विशेषज्ञ ज्ञान, अथवा अनुभव से प्राप्त हुई हो, या
3. इनकम ऐसे Child की हो, जो सेक्शन 80 U में निर्दिष्ट प्रकार की असमर्थता से ग्रसित हो ।
अगर Parents का Divorce हो गया हो तो ऐसी स्थिति में Minor की इनकम उस Parents की इनकम में शामिल की जाएगी जो Previous Year में बच्चे को अपने पास रखता है ।
·
Income From Assets Transferred To HUF –
यदि कोई Individual जो की HUF का मेम्बर है, अपनी Self Generated
Assets को अपर्याप्त अथवा बिना प्रतिफल के परिवार की सम्पति में मिला देता है, और ऐसी परिवर्तित एसेट्स या उसके किसी भाग से इनकम होती है, तो वह इनकम Individual की इनकम में Club की जाएगी न कि HUF की इनकम में ।
अगर परिवर्तित एसेट्स भविष्य में कभी HUF के Partial या Full विभाजन से Individual के जीवनसाथी को प्राप्त होती है, तो यह जीवनसाथी को Indirect Transfer माना जायेगा और यह Individual की Income में Club की जाएगी ।
अगर आपको Clubbing of Income आर्टिकल अच्छा लगा तो इसे शेयर जरूर करे।
FAQs on Clubbing of
Income
Q.1 What is the meaning of clubbing of income?
Ans: 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. E.g., Income of
minor child is clubbed with the income of his/her parent. Section
60 to 64 contains various provisions relating to clubbing of
income.
Q.2 Do any clubbing provisions exist
in case of transfer of income without transfer of asset?
Ans: As per section 60, if a person transfers
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).
E.g., Mr. Raj has given a bungalow owned by him on rent. Annual
rent of the bungalow is Rs. 84,000. He transferred entire rental income to his
friend Mr. Kumar. However, he did not transfer the bungalow. In this situation,
rent of Rs. 84,000 will be taxed in the hands of Mr. Raj.
Q.3 Do any clubbing provisions exist
in case of a revocable transfer?
Ans: 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.
As per section 61, 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. The provisions of section 61 will not apply in case
of a transfer by way of trust which is not revocable during the life time of
the beneficiary or a transfer which is not revocable during the lifetime of the
transferee.
Q.4 Can remuneration received by
spouse of an individual be clubbed with his/her income?
Ans: Under certain circumstances as given in section
64(1)(ii), 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. Provisions in this
regard are as follows:
·
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).
(*) 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 concern other than a company).
Relative for this purpose includes husband, wife, brother or sister
or lineal ascendantor descendent of that individual [ section 2(41)].
Illustration A
Mr. Raja is beneficially holding 21% equity shares of Essem Minerals
Pvt. Ltd. Mrs. Raja is employed as Manager (in accounts department) in Essem
Minerals Pvt. Ltd. at a monthly salary of Rs. 84,000. Mrs. Raja is not having
any knowledge, experience or qualification in the field of accountancy. Will
the remuneration (i.e., salary) received by Mrs. Raja be clubbed with the
income of Mr. Raja?
**
In this situation, Mr. Raja is having substantial interest in Essem
Minerals Pvt. Ltd. and remuneration of Mrs. Raja is not justifiable
(i.e., she is employed without any technical or professional knowledge or
experience) and, hence, salary received by Mrs. Raja from Essem Minerals Pvt.
Ltd. will be clubbed with the income of Mr. Raja and will be taxed in the hands
of Mr. Raja.
Illustration B
Mrs. Kumar is beneficially holding 25% equity shares of SM Construction
Pvt. Ltd. Mr. Kumar is an architect and he is employed as site observer of one
of the construction sites of the SM Construction Pvt. Ltd. at a monthly salary
of Rs. 28,400. The remuneration received by Mr. Kumar is justifiable
considering his knowledge, experience and qualification. Will the remuneration
received by Mr. Kumar be clubbed with the income of Mrs. Kumar because she is
having substantial interest in SM Construction Pvt. Ltd.?
**
In this situation, Mrs. Kumar is having substantial interest in SM
Construction Pvt. Ltd., but Mr. Kumar is deputed on the basis of his knowledge,
experience and qualification and, hence, remuneration paid to him is
justifiable. The clubbing provisions of section 64(1)(ii) apply only in
a case where spouse is deputed without any technical or professional knowledge
or experience. In this case, the remuneration of spouse is justifiable, hence,
salary received by Mr. Kumar will not be clubbed with the income of Mrs. Kumar
but will be taxed in his hands.
Q.5 Can income from assets
transferred to spouse without adequate consideration be clubbed with the income
of transferor-spouse?
Ans: As per section 64(1)(iv), 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). Income from transfer of house property without
adequate consideration will also attract clubbing provisions, however, in such
a case clubbing will be done as per section 27 and not under section
64(1)(iv). The clubbing provisions of section 64(1)(iv) will
apply even if the form of asset is changed by the transferee-spouse. There are
certain situations in which the clubbing provisions of section
64(1)(iv) are not applicable (refer next FAQ for these situations).
Illustration C
Mr. Soham holds 8,400 debentures of Shyamal Minerals Ltd. He gifted
these debentures to his wife. Will the income from debentures be clubbed with
the income of Mr. Soham?
**
In this situation, the debentures are transferred to spouse. Transfer is
via gift (i.e., without any consideration) and, hence, income generated
from the transferred asset, i.e., interest on such debentures will be
clubbed with the income of Mr. Soham.
Illustration D
Mr. Kapoor gifted Rs. 8,40,000 to his wife. The said amount is invested
by his wife in debenture of a company. Will the income from the debenture
purchased by Mrs. Kapoor from gifted money be clubbed with the income of Mr.
Kapoor?
**
Rs. 8,40,000 is transferred to spouse. Fund is transferred via gift
(i.e., without adequate consideration) and, hence, the provisions
of section 64(1)(iv)will be attracted. The provisions of clubbing will
apply even if the form of asset is changed by the transferee-spouse.
In this case asset transferred is money and, subsequently, the form of
asset is changed to debentures, hence, income from debentures acquired from money
gifted by her husband will be clubbed with the income of her husband. Thus,
interest on debenture received by Mrs. Kapoor will be clubbed with the income
of Mr. Kapoor.
Q.6 Are there any situations in which
the clubbing provisions do not apply in case of income from assets transferred
to spouse?
Ans: The clubbing provisions of section 64(1)(iv)
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 the 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).
Q.7 Can income from assets
transferred to son’s wife without adequate consideration be clubbed with the
income of transferor, i.e., father-in-law/mother-in-law?
Ans: As per section 64(1)(vi), if an individual transfers
(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.
Q.8 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?
Ans: As per section 64(1)(vii), 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.
As per section 64(1)(viii), if any 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 son’s wife, then income arising from the asset so transferred will be
clubbed with the income of transferor.
Q.9 Is minor child’s income clubbed
with the income of parent? How can parent claim TDS deducted on his minor’s
child income?
Ans: As per section 64(1A) , 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.
(*) Provisions of section 64(1A) will not apply to any income
of a minor child suffering from disability specified under section 80U. In
other words income of a minor suffering from disability specified
under section 80U will not be clubbed with the income of his/her
parent.
Illustration F
Mr. Raja has two minor children, viz., Master A and Master B. Master A
is a child artist and Master B is suffering from diseases specified under section 80U. Income of A and B are as follows:
·
Income of A from stage shows: Rs. 1,00,000
·
Income of A from bank interest: Rs. 6,000
·
Income of B from bank interest: Rs. 1,20,000.
Will the income of minor children be clubbed with the income of their
parent (Mrs. Raja is not having any income)?
**
As per section 64(1A) , income of minor children is clubbed
with the income of that parent whose income (excluding minor’s income) is
higher. In this case, Mrs. Raja is not having any income and, hence, if any
income is to be clubbed then it will be clubbed with the income of Mr. Raja.
Income of minor child earned on account of manual work or income from
the skill, knowledge, talent, experience, etc., of minor child will not be
clubbed with the income of his/her parent. Thus, income of A from stage show
will not be clubbed with the income of Mr. Raja but income of A from bank
interest of Rs. 6,000 will be clubbed with the income of Mr. Raja.
Income of a minor suffering from disability specified under section
80U will not be clubbed with the income of his/her parent. Hence, any income
of B will not be clubbed with the income of Mr. Raja.
The taxpayer can claim an exemption under section 10(32)). Thus, in
respect of interest income of Rs. 6,000 clubbed in the income of Mr. Raja, he
will be entitled to claim exemption of Rs. 1,500 under section 10(32)),
hence, net income to be clubbed will be Rs. 4,500 (i.e., Rs. 6,000 – Rs.
1,500). Deductee files a declaration with the deductor and the
deductor reports the tax deduction in the name of the other person in the
information relating to deduction of tax referred to in sub-rule (1) of rule
37BA.
Q.10 Will any clubbing provision
apply in case of transfer of asset to Hindu Undivided Family (HUF) by its
member?
Ans: As per section 64(2), 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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