Clubbing of Income means any Income Earned by any Person but included in the total Income on any other Assessee or Transferor of Assets through which Income is Earned. Asseessee may try to avoid Tax or minimise Tax Liability either through transferring the Income or Transferring the Source of Income (i.e. Transferring Asstes from which Assessee is earning Income). To avoid such Tax Evasion Activities Concept of Clubbing of Income is introduced in Income Tax. Any which is clubbed in Hands of Assessee shall full Taxable (except Deduction of Rs. 1500 per Child per annum under sec 10 (32) of Income Tax Act) as like it earned by Asseessee. In Normal Provisions of Income Tax Income includes Losses therfer here any Income clubed the Loss should also be clubbed in the Hands of Assessee. Capital Gain arise on sale or Assets which is Transferred for Without Consideration or For Inadequate Consideration then Such Capital Gain shall be clubbed in the Hands of Transferor. Natural Love and affection Generally Considered as Good Consideration for Gifts but for the Clubbing Provisions under sec 64 of Income Tax Act Natural Love and affection shall not treated as Good Consideration for Gifts.

 

Clubbing of Income of Minor Children

Sec 64(1a): - Any Income Earned by Minor Children shall be clubbed in the Hands of Parents whose Income is more before Clubbing Income of Minor Children. Exemption of Rs. 1500 Per Year for Child   provide to Parents in whose Income Minor Children’s Income Clubbed. But Where Income is earned by Minor Children Way of Manual Work ( although employing or hiring or work done done form Child Labour is illegal in India but Tax Liability can not be Denied on such Income) or Income Earned by Minor Children due to his or her Skill (for example: - Prize money Received from Super Dancer show on Star Plus show or Prize money Received from India Got Talent show etc. ) and Talent or Income earned by Minor Children who suffering from Disability, in that Case Income of Minor Children Taxable in their Hands.  Generally Interest on Saving Account or Interest on Fixed Deposit or Interest on Recurring Deposit or Income on any Other Investment earned by Children is clubbed in the Hands of Parents.

 

Clubbing of Income of Spouse on Assets Transferred for Without Consideration

Sec 64 (1) (IV): - Any Income Earned from Assets Transferred by Spouse for Without Consideration shall be Taxable in the hands of Transferor. Clubbing Provision under sec 64 (1) (IV) of Income Tax Act is applicable only when at the of Transfer of Assets and at Time of Generation of Income from such Assets Relationship of Husband and wife exist. 

 

Clubbing of Income of Son’s Wife on Assets Transferred for Without Consideration

Sec 64 (1) (VI): - Any Income Earned from Assets Transferred by Assessee to his or her son’s wife  for Without Consideration shall be Taxable in the hands of Transferor. Clubbing Provision under sec 64 (1) (VI) of Income Tax Act is applicable only when at the of Transfer of Assets and at Time of Generation of Income from such Assets Relationship of Mother in Law and Daughter in Law or Father in Law and Daughter in Law exist. 

 

Clubbing of Income of any Person to whom Assets is transferred for without Consideration  for the Benefit of Spouse or Benefit of Son’s Wife 

Sec 64 (1) (VI): - Any Income of any Person to whom Assets is transferred for without Consideration  for the Benefit of Spouse or Benefit of Son’s Wife shall be Taxable in the hands of Transferor.

 

Clubbing of Income from any concerned by spouse in which Assessee had substantial Interest

Sec 64 (1) (ii): - Any Income in Nature of Salary, Commission or Bonus in lieu of Salary Earned by Spouse of Assessee from any Concern in which Assessee had substantial Interest either himself or herself or his/her  Relative ( Relatives include Mother, Father, Brother, Sister of Assessee including Liner Ascending and Liner Descending) shall be Taxable in hands of Assesse. However any Income Earned by Spouse of Assesseed due to his or her Professional or Technical Qualification. Here Substantial Interest means 20% or More Share holding of Company or 20% or more share in Profit Sharing Share of Partnership Firm or Association of Persons or Body of Individuals. 

 

Clubbing of Income Which is transferred without actually transferring Asstes

Sec 60: - Any Income earned by Asseessee but transferred to other Person then such income shall be taxable in hands of Assessee i.e. transferor.

 

Clubbing of Income on Assets transfer by Revocable Transfer

Sec 61: - Any Income earned on Assets which Transferred under Revocable Transfer then such Income is Taxable in Hands of Transferor but where Transfer is Revoked only on Death of transferee or Beneficiary then Income on such shall not be clubbed in hands of Transferor, such Income should be taxable in the hands of Transferee as per Normal Provisions of Income Tax Act.

 

Clubbing of Income on Cross Gifting by One Assessee to other Asseessee

When one asseessee Transfer it's Assets to Spouse of Another asseessee and in Return another asseessee Transfer to spouse of first Assessee in that case Income earned on Assets value which equals to both value i.e Income on Value of Both Assets matched, shall be clubbed in the Hands or Transferor. Here Views gifting is a Mechanism to reduce Tax liability by Transferring Assets to other persons wife so that Income Tax Department can not Associates such person with Transferor.

 

Clubbing of Income Income on Assets Transferred to Hindu Undivided Family (HUF)

Sec 64(2): - Any Income earned on Assets Transferred by Asseessee to Hindu Undivided Family (HUF) shall be Taxable in the Hands of Transferor i.e member of Hindu Undivided Family (HUF). Any Income earned on Assets which is originally Transferred by Asseessee to Hindu Undivided Family (HUF) Transferred to spouse of Assessee on Partying of Hindu Undivided Family (HUF) shall be Taxable in hands of Assessee i.e. Transferor of Assets.