By Dr.

Jitendra S Bidawat
9414386759

Clubbing of Income {Deemed Incomes}

As the term suggests, clubbing of income means adding or including the income of another
person (mostly family members) to one’s own income. This is allowed under Section 64 of
the IT Act.

Specified Scenarios when you can Club Income

Section Specified Specified scenario Income to be clubbed

person
Section 60 Any person Transferring income Any income from such asset
without transferring asset will be clubbed in the hands of
either by way of an the transferor
agreement or any other
way,

Section 61 Any person Transferring asset on the Any income from such asset
condition that it can be will be clubbed in the hands of
revoked the transferor
If transfer is not revocable
during the life of both parties
or transfer is made before
1/4/61 and not revocable for a
period exceeding 6 years than
such income is taxable for
transferee

Section Minor child Any income arising or
64(1A) accruing to your minor
child where child includes
both step child and adopted
child. The clubbing
provisions apply even to
minor married daughter.
Income will be clubbed in the
hands of higher earning parent.
Note:
If marriage of child’s parents
does not subsist, income shall
be clubbed in the income of
that parent who maintains the
minor child in the previous
year

If minor child’s income is

clubbed in the hands of parent,
then exemption of Rs. 1,500 is
allowed to the parent.

Exceptions to clubbing
Income of a disabled child
 By Dr. Jitendra S Bidawat
9414386759

(disability of the nature

specified in section 80U)

Income earned by manual

work done by the child or by
activity involving application
of his skill and talent or
specialised knowledge and
experience

Income earned by a major

child. This would also include
income earned from
investments made out of
money gifted to the adult child.
Also, money gifted to an adult
child is exempt from gift tax
under gifts to ‘relative’.

Section Spouse** If your spouse receives any
64(1)(ii) remuneration irrespective of
its nomenclature such as
Salary, commission, fees or
any other form and by any
mode i.e., cash or in kind
from any concern in which
you have substantial
interest*
Income shall be clubbed in the
hands of the taxpayer or
spouse, whose income is
greater (before clubbing).
Exception to clubbing:
Clubbing is not attracted if
spouse possesses technical or
professional qualifications in
relation to any income arising
to the spouse and such income
is solely attributable to the
application of his/her technical
or professional knowledge and
experience

Section Spouse** Direct or indirect transfer of Income from out of such asset
64(1)(iv) assets to your spouse by is clubbed in the hands of the
you for inadequate transferor. Provided the asset is
consideration other than the house property.

Exceptions to clubbing No
clubbing of income in
following cases:

a. Where asset is received as

part of divorce settlement

b. If assets are transferred

before marriage
 By Dr. Jitendra S Bidawat
9414386759

c. No husband and wife

relationship subsists on the
date of accrual of income

d. Asset is acquired by the

spouse out of pin money (i.e.
an allowance given to the wife
by her husband for her
personal and usual household
expenses)

64(1)(vi) Daughter-in- Transfer of assets Any income from such assets

law transferred directly or transferred after 1/6/73 is
indirectly to your daughter clubbed in the hands of the
in-law by you for transferor
inadequate consideration Any income from such assets
transferred before 1/6/73 is
clubbed in the hands of the
transferee

64(1)(vii) Any person or Transferring any assets Any income from such assets
association of directly or directly for an transferred after 1/6/73 is
person inadequate consideration to clubbed in the hands of the
any person or association of transferor
persons to benefit your Any income from such assets
daughter in-law either transferred before 1/6/73 is
immediately or on deferred clubbed in the hands of the
basis transferee

64(1)(viii) Any person or Transferring any assets Income from such assets will
association of directly or directly for an be considered as your income
person inadequate consideration to and clubbed in your hands
any person or association of
persons to benefit your
spouse either immediately
or on deferred basis

Section Hindu In case, a member of HUF Income from such converted

64(2) Undivided transfers his individual property after 31/12/69 shall
Family property to HUF for be clubbed in the hands of
inadequate consideration or individual
converts such property into Income from such converted
HUF property property before 31/12/69 shall
be clubbed in the hands of
HUF

Other Unexplained Cash Credit

Deemed section 68
 By Dr. Jitendra S Bidawat
9414386759

Incomes Unexplained Investments Income taxable for Assessee

Sections 68 Unexplained Money
& 69 Not fully Disclosed
Investments
Unexplained Expenditure
Amount Borrowed or
Repaid on Hundi
(section 69)

*An individual is said to have the substantial interest in the concern if–
 In case of a company, individual either by himself or along with his relative/s
beneficially owns shares having 20% or more voting power (not being shares entitled
to a fixed rate of dividend whether with or without a further right to participate in
profits)
 In any other case, such individual either alone or along with his relative/s is entitled to
20% or more of profits in the aggregate of such concern at any time during the
previous year.
**Income from reinvestment of clubbed income by a spouse is not clubbed in the hands of
individual.

Things to Remember
 The clubbing provision applies to Income and loss both.
 Capital gain on further transfer of the asset by the transferee will be considered as
income and it shall be clubbed in the income of transferor.
 The income derived from the converted form of asset shall be clubbed in the hands of
transferor.
 If part consideration is payable or paid, then only the inadequate consideration will be
clubbed in the hands of the the transferor
 The clubbing provisions will not apply on the income derived from the clubbed
income.