All about clubbing of income

Section

Specified person

Specified scenario

Income to be clubbed

Section 60

Any person

Transferring income without transferring asset either by way of an agreement or any other way,

Any income from such asset will be clubbed in the hands of the transferor

Section 61

Any person

Transferring asset on the condition that it can be revoked

Any income from such asset will be clubbed in the hands of the transferor

Section 64(1A)

Minor child

Any income arising or accruing to your minor child where the child includes both step child and adopted child. The clubbing provisions apply even to minor married daughters.

Income will be clubbed in the hands of higher earning parents.

Note:

• If marriage of child's parents does not subsist, income shall be clubbed in the income of that parent who maintains the minor child in the previous year
• If a minor child's income is clubbed in the hands of the parent, then exemption of Rs. 1,500 is allowed to the parent.

Exceptions to clubbing-

• Income of a disabled child (disability of the nature specified in section 80U)
• Income earned by manual work done by the child or by activity involving application of his skill and talent or specialized knowledge and experience
• Income earned by a major child. This would also include income earned from investments made out of money gifted to the adult child. Also, money gifted to an adult child is exempt from gift tax under gifts to ‘relative'.

Section 64(1)(ii)

Spouse**

If your spouse receives any remuneration irrespective of its nomenclature such as Salary, commission, fees or any other form and by any mode i.e., cash or in kind from any concern in which you have substantial interest*

Income shall be clubbed in the hands of the taxpayer or spouse, whose income is greater (before clubbing). Exception to clubbing: Clubbing is not attracted if spouse possesses technical or professional qualifications in relation to any income arising to the spouse and such income is solely attributable to the application of his/her technical or professional knowledge and experience

Section 64(1)(iv)

Spouse**

Direct or indirect transfer of assets to your spouse by you for inadequate consideration

Income from out of such assets is clubbed in the hands of the transferor. Provided the asset is other than the house property.

Exceptions to clubbing -

No clubbing of income in following cases:

• Where asset is received as part of divorce settlement
• If assets are transferred before marriage
• No husband and wife relationship subsists on the date of accrual of income
• Asset is acquired by the spouse out of pin money (i.e. an allowance given to the wife by her husband for her personal and usual household expenses)

64(1)(vi)

Daughter-in-law

Transfer of assets transferred directly or indirectly to your daughter in-law by you for inadequate consideration

Any income from such assets transferred is clubbed in the hands of the transferor

64(1)(vii)

Any person or association of person

Transferring any assets directly or directly for inadequate consideration to any person or association of persons to benefit your daughter in-law either immediately or on a deferred basis

Income from such assets will be considered as your income and clubbed in your hands

64(1)(viii)

Any person or association of person

Transferring any assets directly or directly for inadequate consideration to any person or association of persons to benefit your spouse either immediately or on a deferred basis

Income from such assets will be considered as your income and clubbed in your hands

Section 64(2)

Hindu Undivided Family

In case, a member of HUF transfers his individual property to HUF for inadequate consideration or converts such property into HUF property

Income from such converted property shall be clubbed in the hands of individual