Income of other persons included in assessees total income

Or
Clubbing provisions
Section 60
If an income is transferred without transfer of the asset from such income arises, it is deemed to be the income of
transferor.

.

Example
A is holder of 100 debentures of Rs. 100 each of a company on which he is entitled to interest of 10%. He transfers this
interest to his friend B without transferring the debentures. In this case, the interest of Rs. 1000 is deemed to be income of
A.
Section 61
All income arising to any person by reason of a revocable transfer of assets shall be included in the total income of
the transferor.
Example
A is holder of 100 debenture of Rs. 100 each of a company on which he is entitled to interest of 10%. He transfer these
debentures to his friend under a revocable transfer. In this case, the interest of Rs. 1000 is deemed to be income of A.
In the following cases clubbing provisions do not hold
1. If the transfer by way of trust or otherwise and is not revocable during the life time of the beneficiary or transferee
or
2. If the transfer was made before 01-04.1961 and such transfer is not revocable for a period exceeding 6 years.
Section 64 (1) (ii)
If there is an individual and his or her spouse in working in a concern in which that individual has substantial interest
(i.e. the individual either by himself or along with his relatives* holds equity shares carrying not less than 20% of
voting power and if no share capital exists, then 20% of the profits), then salary, commission, fees or any other form
of remuneration, whether in cash or in kind, received by the spouse from that concern is clubbed or added to the
income of the individual.

Exception
If the salary, commission, fees or any other form of remuneration is due the application of technical or professional
qualification, knowledge and experience of the spouse, then the above provision is not applicable.

, , , .
*

Relative here means husband, wife, brother or sister or any lineal ascendant or descendent of the individual.

Section 64(1) (iv)

If an individual transfers an asset to his or her spouse without sufficient consideration, then any income arising from
that to the spouse is included in the income of the transferor. Such transfer may be direct or indirect. This is also not
necessary that the asset remains in the original form.

(asset)
. .

Exception
If asset is transferred to live apart, then Section 64(1) (iv) is not applicable.
, .
Section 64 (1) (vi)
If an individual transfers an asset to his or her sons wife without sufficient consideration, then any income arising
from that to the sons wife is included in the income of the transferor. Such transfer may be direct or indirect. This
is also not necessary that the asset remains in the original form.

. . .

Section 64(1A)
1. If there is minor child (including adopted child or step child), then his income is included in the income of his
or her father or mother who has higher income. If the marriage of the parents does not exist, then the clubbing
will be made to the parent who maintains the minor child. The income to be included is subject to exemption
of Rs. 1500 per minor child under Section 10(32).

 . ,
. . ,
. 10 (32) Rs. 1500 .

2. The following incomes are not included:

a. Income from manual work done by him
b. Income from activity involving application of his skill, talent or specialized knowledge and experience.

, , .
3. If the minor child is suffering from any disability specified in Section 80U, then such income will not be
included in the income of his parent but will be assessed in the hands of the child.
80 U (disability) (suffering) 64(1A) .

Questions
1. H, a mentally challenged minor has a total income of Rs. 1, 20,000 for the assessment year 2014-15. The total income
of his father L and of his mother R for the relevant assessment year is Rs. 2, 40,000 and Rs. 1, 80,000 respectively.
Discuss the treatment to be accorded to the total income of H for the relevant assessment year.
Solution
Mentally challenged is covered under Section 80U, therefore, the provisions of clubbing under Section 64(1A) can
be applied here. The income of H would be assessed in his hands.
2. A and B are husband and wife. B acquires a job of a clerk in a company XYZ Ltd in which A holds equity shares
carrying 25% voting power. The salary of B is Rs. 25,000 per month. The business income of A is Rs. 3, 50,000.
Calculate the taxable income of A and B.
Solution
A

Business income

3,50,000

Nil

Income from salaries

3,00,000

Nil

6,50,000

Nil

(A holds equity shares carrying 25% voting power which means he has
substantial interest in XYZ Ltd., therefore, the provisions of Section 64(1)
(ii) are attracted here. That is why the salary earned by B is clubbed or
included in the income of A)
Total income

3. A and B are husband and wife. B (a chartered accountant) acquires a job of an accountant in a company XYZ Ltd in
which A holds equity shares carrying 25% voting power. The salary of B is Rs. 25,000 per month. The business
income of A is Rs. 3, 50,000. Calculate the taxable income of A and B.
Solution

Business income

3,50,000

Nil

Income from salaries

3,00,000

(Although, A holds equity shares carrying 25% voting power which means
he has substantial interest in XYZ Ltd., yet the provisions of Section 64(1)
(ii) are not attracted here because B receives the salary because she is a
chartered accountant i.e. due to professional qualification. That is why the
salary earned by B is not clubbed or included in the income of A.
Total income

3,50,000

3,00,000

4. X is a minor child whose income Rs. 1, 60,000 while the income of his father Y is Rs. 2, 40,000 and his mother is
Rs. 2, 00,000. Calculate taxable income of each of them.
Solution
Since, X is a minor child, therefore, the provisions of Section 64(1A) are applicable here according to which the
income of a minor child is clubbed with the income of his or her parent who has higher income. In the present case,
father Y has greater income compared to mother Z, therefore, income of X will be clubbed to the income of Y.

X\

Particulars

Minor child

Father

Mother

Incomes reported as per the question

160000

2,40,000

2,00,000

Clubbing due to Section 64(1A) after exemption under

1,60,000-1500=

Section 10(32) of Rs. 1500

158500

Taxable income

Nil

4,00,000

2,00,000

5. A and B are husband and wife. B acquires a job of an accountant in a company XYZ Ltd in which A holds equity
shares carrying 19% voting power. The salary of B is Rs. 25,000 per month. The business income of A is Rs. 3,
50,000. Calculate the taxable income of A and B.
Solution

Business income

3,50,000

Nil

Income from salaries

3,00,000

(A holds equity shares carrying 19% voting power which is less than 20%
and therefore he has no substantial interest in XYZ Ltd., provisions of Section
64(1) (ii) are not attracted. That is why the salary earned by B is not clubbed
or included in the income of A.
Total income

3,50,000

3,00,000