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What Is Clubbing Of Income And What Are The Income Tax Rules For It In India?

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Every tax payer wants to pay less tax so they might not disclose the assets, incomes or investments they had or disclose them at lower rate so that their tax liability comes down and they have to pay less tax. Another thing which tax payer so is they transfer income or part of income to their spouse or children so that they will have low tax liability.

So Government has made some rules for clubbing of income which are described in u/s 60 to u/s 65. In which it has been stated which income can be transferred and which will be treated or clubbed as the income of assesse.

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If there is transfer of Income without transfer of Asset [u/s 60]

If a person transfer his income generated from any asset to any person without transferring the ownership of asset than that income will be included in the total income of the assesse.

Revocable Asset [u/s 61]

A revocable asset is that asset which contain provision that it can be re-transferred directly or in-directly or which income can be transfer wholly or partly back to assesse. If income is generated from such asset then income is clubbed into the assesse total income.

Income From Spouse [u/s 64 (1)(ii)]

If income is generated by spouse by the way of salary. commission, fee or any other way from a concern in which individual has interest then income is clubbed to individual income.

But if spouse is generating income from his/ her technical or professional qualification then income is not clubbed and above rule is not applicable.

Clubbing Of Income

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Income generated by Daughter in law [u/s 64(1)(vi)]

If any individual transfer any asset to his daughter-in-law without any consideration then income from such asset is included in individual or transferor’s income. This rule is only applicable only if asset is transferred after 31 May 1973.

Transfer of Asset to person or association of person for the benefit of Spouse [u/s 64(1)(vii)]

If an individual transfer any of his asset to any other person or group/association of person for the benefit of his/ her spouse, then any income generated from that asset is included in the income of individual.

Transfer of Asset to person or association of person for the benefit of Daughter-In-Law [u/s 64(1)(viii)]

If an individual transfer any of his asset, after 31 May 1973, to any person or group of persons for the benefit of his daughter-in-law, then income generated from that asset will be included in the income of transferor.

Income Of Minor Child [u/s 64 (1A)]

If any income is generated by any minor child then that income should be included or clubbed to the income of parents but if minor child is physically or mentally handicapped than minor child’s income will not be clubbed into income of his parents and minor child’s total income is calculated separately.

If anyone has adopted or has step-child then it also comes under minor child if he/ she is below 18 years. When income of minor child is clubbed into parents income then parents can claim exemption of Rs 1500 per minor child or income included whichever is less u/s 10(32)

Transfer Of Self-Property to HUF of Which He Is a Member

If an individual transfer any self acquired property to Hindu Undivided Family of which he is a member without any adequate consideration then income generated from such property will be treated as income of individual not of HUF.

Benami Transaction

If a person transfer his asset to a virtual or a person who is not a real person than that transaction is called Benami Transaction and that un-real person is called Benamidar. If any assessing officer found or say transaction is Benami than income generated from that asset is included in the income of individual and tax will be imposed on individual’s total income.

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