Minor account clubbing
This query is : Resolved
12 April 2013
For first time Minor Account is clubbed to parent who's income is highest.
I just want to know that whether the highest income is gross taxable or net taxable.
Example
if Husband's gross income is 3 lakh and net income is 2 lakh and wife's gross income is 2.5lakh and net income is 2.25 lakh then the son's account should be clubbed in husband or wife's account?
Regards
Rajesh Nagda
(rajesh.nagda@gmail.com)
I just want to know that whether the highest income is gross taxable or net taxable.
Example
if Husband's gross income is 3 lakh and net income is 2 lakh and wife's gross income is 2.5lakh and net income is 2.25 lakh then the son's account should be clubbed in husband or wife's account?
Regards
Rajesh Nagda
(rajesh.nagda@gmail.com)
12 April 2013
In wife's account it has to clubbed.
OM SAI SRI SAI JAI JAI SAI
OM SAI SRI SAI JAI JAI SAI
12 April 2013
As Seeing Section 64 1(A) there is no where specified whether it is gross taxable or net taxable
Initially My Accountant said that it will be clubbed in Wife's account. Now he is saying that it will be clubbed in Husband's account.
i.e. Gross Taxable income should be taken for comparision.
Please guide me and if any website link is there which states that it is nett taxable income then give me the link.
Regards
Rajesh Nagda
(rajesh.nagda@gmail.com)
Initially My Accountant said that it will be clubbed in Wife's account. Now he is saying that it will be clubbed in Husband's account.
i.e. Gross Taxable income should be taken for comparision.
Please guide me and if any website link is there which states that it is nett taxable income then give me the link.
Regards
Rajesh Nagda
(rajesh.nagda@gmail.com)
12 April 2013
According to the section 64(1A) of the income tax act,1961 Minor child's income shall be clubbed in the hands of parents "Where the marriage of the parents subsist, the income of the minor child shall be included with the income of that parent whose total income(total income Underlining point),excluding the income to be clubbed,is greater. In case, where the marriage of the parents does not subsist,the income of the minor child will be included in the income of the parent who maintains the minor child in the previous year."
Thus according to the above explanation minor's income shall be clubbed in the hands of parents whose total income is high.
I above said "total income" is underlining point. So we all know Total income means the income on which we paying tax i.e income after deduction of all eligible deductions like Chapter VIA deductions,set off etc.... from gross total income.
Thus in your case in the hands of wife the minor's income shall be clubbed.
OM SAI SRI SAI JAI JAI SAI
Thus according to the above explanation minor's income shall be clubbed in the hands of parents whose total income is high.
I above said "total income" is underlining point. So we all know Total income means the income on which we paying tax i.e income after deduction of all eligible deductions like Chapter VIA deductions,set off etc.... from gross total income.
Thus in your case in the hands of wife the minor's income shall be clubbed.
OM SAI SRI SAI JAI JAI SAI
12 April 2013
Dear Sir
Below defination Of Section 5 does not clearly specify any deductions.
Scope of total income.
5. (1) Subject to the provisions of this Act, the total income of any previous
year of a person who is a resident includes all income from whatever source
derived which—
(a) is received or is deemed to be received in India in such year by or
on behalf of such person ; or
(b) accrues or arises or is deemed to accrue or arise to him in India
during such year ; or
(c) accrues or arises to him outside India during such year :
Provided that, in the case of a person not ordinarily resident in India
within the meaning of sub-section (6)* of section 6, the income which
accrues or arises to him outside India shall not be so included unless
it is derived from a business controlled in or a profession set up in
India.
(2) Subject to the provisions of this Act, the total income of any previous year
of a person who is a non-resident includes all income from whatever source
derived which—
(a) is received or is deemed to be received in India in such year by or
on behalf of such person ; or
(b) accrues or arises or is deemed to accrue or arise to him in India
during such year.
Explanation 1.—Income accruing or arising outside India shall not be deemed to
be received in India within the meaning of this section by reason only of the fact
that it is taken into account in a balance sheet prepared in India.
Below defination Of Section 5 does not clearly specify any deductions.
Scope of total income.
5. (1) Subject to the provisions of this Act, the total income of any previous
year of a person who is a resident includes all income from whatever source
derived which—
(a) is received or is deemed to be received in India in such year by or
on behalf of such person ; or
(b) accrues or arises or is deemed to accrue or arise to him in India
during such year ; or
(c) accrues or arises to him outside India during such year :
Provided that, in the case of a person not ordinarily resident in India
within the meaning of sub-section (6)* of section 6, the income which
accrues or arises to him outside India shall not be so included unless
it is derived from a business controlled in or a profession set up in
India.
(2) Subject to the provisions of this Act, the total income of any previous year
of a person who is a non-resident includes all income from whatever source
derived which—
(a) is received or is deemed to be received in India in such year by or
on behalf of such person ; or
(b) accrues or arises or is deemed to accrue or arise to him in India
during such year.
Explanation 1.—Income accruing or arising outside India shall not be deemed to
be received in India within the meaning of this section by reason only of the fact
that it is taken into account in a balance sheet prepared in India.
03 August 2024
To clarify the application of Section 64(1A) of the Income Tax Act regarding the clubbing of a minor's income, here’s a detailed explanation:
### **Clubbing of Minor’s Income under Section 64(1A)**
#### **1. Clubbing Criteria**
Section 64(1A) of the Income Tax Act mandates that the income of a minor child, which is not earned through their skill, talent, or specialized knowledge, should be clubbed with the income of the parent whose income is the highest. This section is used to ensure that the income of a minor child is included in the tax computation of the parent in cases where the income does not arise from the minor’s skill or talent.
#### **2. Gross vs. Net Income**
- **Gross vs. Net Income:**
For the purpose of determining which parent’s income should include the minor’s income, the Act requires you to consider the "total income" of the parents. In this context, "total income" refers to the net taxable income rather than the gross income.
- **Explanation:**
Net taxable income is the income after accounting for all permissible deductions, exemptions, and adjustments, as defined under various sections of the Income Tax Act. Gross income refers to the total earnings before any deductions or exemptions.
#### **3. Determination Process**
Given the scenario:
- **Husband:**
- Gross Income: ₹3,00,000
- Net Income: ₹2,00,000
- **Wife:**
- Gross Income: ₹2,50,000
- Net Income: ₹2,25,000
For clubbing purposes, you should compare the net taxable income of both parents:
- **Husband’s Net Taxable Income:** ₹2,00,000
- **Wife’s Net Taxable Income:** ₹2,25,000
Since the wife’s net taxable income is higher, the minor’s income should be clubbed with the wife’s income.
#### **4. Legal References**
- **Section 64(1A) Explanation:**
Section 64(1A) does not specifically mention whether to use gross or net income, but the term "total income" used in the Income Tax Act generally refers to net taxable income.
- **Section 5:**
Section 5 of the Income Tax Act, which defines the scope of total income, does not directly address the issue of clubbing but provides an understanding of what constitutes total income.
### **Conclusion**
In your case, based on the net taxable income, the minor’s income should be clubbed with the wife’s income since her net taxable income is higher.
**For Further Reading:**
- You may refer to the official Income Tax Act documentation or tax guides for detailed explanations. Websites such as the [Income Tax Department of India](https://www.incometax.gov.in) provide comprehensive resources and updates on income tax regulations.
If you require further clarification or have additional queries, consulting a tax professional or a chartered accountant might be beneficial to ensure compliance with the latest provisions and accurate application of the law.
### **Clubbing of Minor’s Income under Section 64(1A)**
#### **1. Clubbing Criteria**
Section 64(1A) of the Income Tax Act mandates that the income of a minor child, which is not earned through their skill, talent, or specialized knowledge, should be clubbed with the income of the parent whose income is the highest. This section is used to ensure that the income of a minor child is included in the tax computation of the parent in cases where the income does not arise from the minor’s skill or talent.
#### **2. Gross vs. Net Income**
- **Gross vs. Net Income:**
For the purpose of determining which parent’s income should include the minor’s income, the Act requires you to consider the "total income" of the parents. In this context, "total income" refers to the net taxable income rather than the gross income.
- **Explanation:**
Net taxable income is the income after accounting for all permissible deductions, exemptions, and adjustments, as defined under various sections of the Income Tax Act. Gross income refers to the total earnings before any deductions or exemptions.
#### **3. Determination Process**
Given the scenario:
- **Husband:**
- Gross Income: ₹3,00,000
- Net Income: ₹2,00,000
- **Wife:**
- Gross Income: ₹2,50,000
- Net Income: ₹2,25,000
For clubbing purposes, you should compare the net taxable income of both parents:
- **Husband’s Net Taxable Income:** ₹2,00,000
- **Wife’s Net Taxable Income:** ₹2,25,000
Since the wife’s net taxable income is higher, the minor’s income should be clubbed with the wife’s income.
#### **4. Legal References**
- **Section 64(1A) Explanation:**
Section 64(1A) does not specifically mention whether to use gross or net income, but the term "total income" used in the Income Tax Act generally refers to net taxable income.
- **Section 5:**
Section 5 of the Income Tax Act, which defines the scope of total income, does not directly address the issue of clubbing but provides an understanding of what constitutes total income.
### **Conclusion**
In your case, based on the net taxable income, the minor’s income should be clubbed with the wife’s income since her net taxable income is higher.
**For Further Reading:**
- You may refer to the official Income Tax Act documentation or tax guides for detailed explanations. Websites such as the [Income Tax Department of India](https://www.incometax.gov.in) provide comprehensive resources and updates on income tax regulations.
If you require further clarification or have additional queries, consulting a tax professional or a chartered accountant might be beneficial to ensure compliance with the latest provisions and accurate application of the law.
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