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Chapter 9

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Clubbing of Income

I n some cases the income of a person is clubbed with the income of other person and is, therefore,
taxed in the hand of that other person instead of the person to whom the income arises. The cases are

9:1 Revocable Transfer of asset

If a person “A” transfer asset to person “B” under revocable transfer, then the income arising from that
asset will continue to be assessed in the hand of the person “A”.

9:2 Transfer of income where there is no transfer of asset

If a person “A” transfer only the income from the asset without transferring the asset, the income will
continue to be taxed in the hand of “A” irrespective of the fact whether the transfer is revocable or irrevocable.

9:3 Income of spouse

If the spouse of an individual derives income in the nature of salary, commission, fees or any other remuneration
from a concern in which such individual has a substantial interest, then this income will be clubbed with the
income of such individual and liable to be taxed as the income of the individual instead of the spouse. The
clubbing will not take place in case such income arises to the spouse because of his/her technical or professional
qualification and the income is solely attributable to the application of such knowledge and experience.

Substantial interest means holding at least 20% share or entitled to 20% profit by the individual and
his relative.

9:4 Income from asset transferred to spouse

If an asset is transferred directly or indirectly to the spouse without adequate consideration or otherwise
than in connection with an agreement to live apart; then the income arising from such asset is taxed in the
hand of the transferor. Even where the asset is transferred to an association of person without adequate
consideration for the benefit of the spouse, the clubbing provision will be attracted.

9:5 Income from asset transferred to son’s wife

If an asset is transferred directly or indirectly to son’s wife without adequate consideration; then the income arising
from such asset is taxed in the hand of the transferor. Even where the asset is transferred to an association of person
without adequate consideration for the benefit of the son’s wife, the clubbing provision will be attracted.

9:6 Income arising to minor child

Income of minor child is clubbed in the hand of the parent whose income is greater. To the extent of Rs
1500 per child, the income is exempted.

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The clubbing provision is not attracted in the case of disabled child and in cases where the income is
earned through manual work done by him or by activity involving application of skill, talent or specialized
knowledge or experience.

9:7 Asset thrown into HUF

Where an individual converts his self acquired property to joint property of the HUF or transfers the
property to HUF otherwise than for adequate consideration; the income from such property will be included
in the income of the individual and not of the HUF.
In all the above cases, the tax payable on such clubbing of income can also be recovered from the
beneficiary (in addition to the assessee) to whom the property is transferred.

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Chapter Review

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Exercise

1. In case of a revocable transfer of asset from one person to another person, the income of the
asset will be assessed in the hand of
a. Transferor
b. Transferee
c. Transferee; till the time the transfer is revoked.
2. If income arising of an asset is transferred by one person to another person without actually
transferring the asset, the income shall be assessed in the hand of
a. Transferor
b. Transferee
c. Transferor in case the transfer is revocable and transferee if the transfer is irrevocable.
3. “A” is a partner in a firm where his wife “B” is employed. The wife derives salary from this
employment. In whose hand the salary will be assessed?
a. “A” in all conditions
b. “B” in all conditions
c. “B”, if the salary is derived by her solely due to her technical or professional qualification,
otherwise “A”.
4. Income arising to a minor child is clubbed in the hand of
a. Father always
b. Mother always
c. Father or Mother whose income, before clubbing, is greater.
5. How much deduction is allowed in the hand of the parent in whose income the income of the minor
child is clubbed?
a. Rs 1500/-
b. Rs 1500/- per minor child
c. For each minor child, Rs 1500 or the income of the minor child, whichever is lower.
6. In which of the following transfers the income from the asset transferred without adequate
consideration, is assessed in the hand of the transferor.
a. Transferred to spouse in connection with an agreement to live apart.
b. Transferred to son’s wife
c. Transferred to HUF
d. Transferred to Father
e. Transferred to Mother
f. Transferred to Son, aged 20 years
g. Transferred to grand son.
h. Transferred to spouse otherwise than an agreement to live apart.
i. Transferred to brother.
j. Transferred to daughter’s husband.
7. A minor child is an artist, who has earned Rs 1,00,000/- while acting in a TV serial during a
previous year. In whose hand this income shall be assessed.
a. In the hand of the parent whose income is greater, before clubbing
b. In the hand of the parent who has business income.
c. In the hand of the minor child.

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Answers:
1. a.
2. a.
3. c.
4. c.
5. c.
6. b. Transferred to son’s wife
c. Transferred to HUF
h. Transferred to spouse otherwise than an agreement to live apart.
7. c.

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