Clubbing of Income
Section 60 Transfer of Income
Where a person transfer to any other person income from an asset without transferring that assets, the income shall be included in the total income of the transferor.
Section 61 Revocable Transfer of Assets
When a person transfers any assets to any other person with a right to revoke the transfer, all income accruing to transferee from the assets shall be included in the hands of the transferor.
As per section 63, a transfer shall be deemed to be revocable if –
Ø It contains any provisions for re-transfer directly or indirectly of the whole or any part of the income or assets to the transferor;
Ø If in any way gives the transferor a right to re assume power directly or indirectly over the whole or any part of the income or assets.
Section 62 Transfer irrevocable for a specified period
Ø If there is irrevocable assets for a specified period,the income from such assets shall not be included in the income of transferor provided the following conditions are provided:
Ø The transfer was made before April 1961 and was revocable for the period exceeding six years.
Ø The transfer is made through a trust and is not revocable during the life time of the beneficiary.
Ø The transfer is not revocable during the life time of the transferee.
Ø The transferor does not derive any direct benefit.
Section 64 (1) Income of Spouse
Any income arises directly or indirectly, to the spouse by way of salary, commission, fees from the concern in which assessee has substantial interest will be clubbed in the hands of the assessee.
Cases where clubbing will not take place:
– If the remuneration is on account of technical or professional qualification of the spouse.
– If the relationship of husband & wife ceases to exist.
Substantial Interest
– Beneficial of owner of shares (excluding fixed rate of dividend to the exent of 20% or more)
– Carrying not less than 20% of voting power or
– Not less than 20% of the profit in such co.
When both the husband & wife do not have professional or technical qualification but has substantial interest than the remuneration will be clubbed in the hands of that spouse whose income is higher.
Section 64 (1) (iv) Assets transfer to spouse
Whenever an individual transfers assts to the spouse without adequate consideration the income arising from such assets will be clubbed in the hands of transferor.
When clubbing will not take place:-
a) If the assets are transferred for adequate consideration.
b) The relationship of husband & wife should not exist at the time when the assets are transferred as well as when the income is accrued.
Assets transferred to the third person from the immediate or deferred benefit of the spouse will be clubbed in the hands of transferor.
Assets transferred to son’ s wife and assets transferred to the third person for the benefit of son’s wife without adequate consideration ,the income from such assets will be included in the hands of transferor.
Section 64 (1A) Clubbing of Income of a Minor Child.
The income of a minor child is taxable in the hands of the parents.
In the case the marriage of parents exists then that income will be clubbed in the hands of the parents whose income is higher.
If the marriage of parents does not exist then the income will be taxed in the hands of that parents who maintains the minor child.
When clubbing will not take place.
– If the minor child earns income through own skills and talent.
– It the minor earns income through manual work.
– If the minor child is suffering from a disability in the nature of section 80 U.
Sections 64 (2) Conversion of self acquired property into joint family property.
Whenever an individual brings his self acquired property and transfers it to the family for the common benefit of the family or throwing it into the common stock of the family other than adequate consideration, then income arising from such property will be clubbed in the hands of an individual.