TOPIC:-

CLUBBING OF INCOMES AND

AGGREGATION OF INCOMES

BY
RESHMA.K
 CLUBBING OF INCOMES
• MEANING-
Income of other
persons shall be included in the assesses
total income. Such inclusion of income of
other person in the income of the
assessee is called ‘clubbing of income’.
 INCOME OF OTHER PERSONS INCLUDED IN
THE ASSESSE’S TOTAL INCOME
1. Transfer of income without transfer of assets.
(sec.60)
2. Revocable transfer of assets.(sec.61)
3. Income of spouse.
a) income of the spouse by way of salary,
commission, fees or any other form of
remuneration from a concern in which such
individual has a substantial interest.(sec.64(1)(ii))
b) if an asset (excluding house property) is
transferred by an individual to his or her spouse,
directly or indirectly, neither for adequate
consideration nor in connection with an
agreement to live part, the income from such
asset to the spouse, will be included in the
income of the transferor.(sec.64(1)(iv))
4. Income of daughter -in –law(sec.64(1)(iv))
5. Transfer of assets to other persons or
association of persons for the benefit of spouse.
(sec.64(1)(vii))
6. Income from assets transferred to a person or
association of persons for the benefit of his son’s
wife.(sec.64(1)(viii))
7. Income from business(sec.64(1))
8. Income of a minor child.(sec.64(1A))
9. Transfer of separate individual property or self
acquired property to HUF of which he is a
member or conversion of property.(sec.64(2)
(a)and(b)).
10. Benami transactions.
 1. TRANSFER OF INCOME
WITHOUT TRANSFER OF
ASSETS.(SEC.60)

If a person transfers to
another person his income from an asset
without transferring the ownership of the
asset, the income from such asset shall be
deemed to be the income of the transferor
and shall be included in his total income.
 Example:-
• Mr. A owns a house property from which
he earns a rental income of RS.50000-
now suppose he transfers such rental
income to his wife either by directing the
tenant to pay the rent directly to her or by
otherwise. In this case although rent will
be received by his wife yet it shall be
included in the income of Mr. A (that is
transferor of income)
 2.REVOCABLE TRANSFER OF
ASSETS.(SEC.61)
All incomes arising to any
person by virtue of a revocable transfer of
assets shall be chargeable to income tax as
the income of the transferor and shall be
included in his total income.
A transfer shall be deemed to be revocable
if:
1. It contains any provision for the re transfer
directly or in directly of the whole or any part of
the income or assets to the transferor OR
2. If in any way gives the transferor a right to re
assume power directly or indirectly over the
whole or any part of income or assets.
• Example-
Mr. A transfers
house property to Mr. B which shall not be
revoked during the life time of Mr. B Thus
any income from transferred house
property shall be treated as income of
Mr.B (transferee) during his life time.
 3.INCOME OF SPOUSE.
a) income of the spouse by way of salary,
commission, fees or any other form of
remuneration from a concern in which
such individual has a substantial interest.
(sec.64(1)(ii))
Exception- if the payment of the above type
of remuneration are purely due to the
technical or professional qualification of
the spouse, the remuneration paid to the
spouse shall not be clubbed with the
income of the individual.
SUBSTANTIAL INTEREST
If an individual has got a substantial interest in any
company or concern then any income accruing
to the spouse of such individual from that
concern or company shall be included in the
total income of the individual having
substantial interest in such concern. The
income to the spouse may be way of salary,
bonus, commission, fee or any other
remuneration.
Meaning of substantial interest
1. In case of company- a person having at least
20% of equity shares carrying voting rights
2. In other cases- a person entitled to at least
20% of the profit of the concern.
• Example-

Mrs. A draws salary from BCL LTD in which

her husband is a major shareholding 20%
of shares carrying voting rights. In this
case salary received by a shall be
included in the income of her husband.
b) if an asset (excluding house property) is
transferred by an individual to his or her
spouse, directly or indirectly, neither for
adequate consideration nor in connection with
an agreement to live part, the income from
such asset to the spouse, will be included in
the income of the transferor.(sec.64(1)(iv))
Example- Mr. A transfers debentures of CETA LTD
worth RS.50000 to his wife b out of natural
love and affection ie.without adequate
consideration) now interest on such
debentures accruing to b shall be included in
the total income of Mr. A.
4.INCOME OF DAUGHTER -IN –
LAW(SEC.64(1)(IV))

If an individual transfers
assets after 31st may ,1973, without
adequate consideration, to his daughter -in
–law (son’s wife) any income arising from
such assets will be included in the total
income of the transferor.
5. TRANSFER OF ASSETS TO OTHER
PERSONS OR ASSOCIATION OF
PERSONS FOR THE BENEFIT OF
SPOUSE.(SEC.64(1)(VII))
if an individual transfers assets, without
adequate consideration, to some other person or
association of persons for immediate or differed
benefit of his or her spouse, any income arising from
such assets to that person or association will be
included in the total income of the transferor to the
extent it is for the benefit of the spouse. For instance
suppose the income from the transferred asset is
RS.10000 and half of this reserved for the benefit of
the spouse of the transferor, then RS.50000 shall be
included in the income of the transferor.
6. INCOME FROM ASSETS
TRANSFERRED TO A PERSON OR
ASSOCIATION OF PERSONS FOR
THE BENEFIT OF HIS SON’S WIFE.
(SEC.64(1))
Any income arising to any
person or association of persons form the assets
transferred to it by an individual after 31.5.1973,
except for adequate consideration, shall to the
extent to which the income from such assets is for
the immediate or deferred benefit of his son’s
wife ,be included in the total income of such
individual or the transferor.
7.INCOME FROM BUSINESS(SEC.64(1))
If the individual transfers any
asset directly or in directly to the spouse
or son’s wife such assets are invested by
the transferee:
• In any business, but not as capital
contribution as a partner in a firm or
being admitted to the benefits of
partnership in a firm ,the amount
calculated as under will be included in
the income of transferor:
 Contd…

Value of the asset transferred

by transferor on the 1st day of P.Y
 profit share of
transferee
from
business
Total investment on the 1st day
of P.Y by transferee
• 8. INCOME OF A MINOR CHILD.(SEC.64(1A))
Minor child- a minor child included a
step-child and an adopted child.
Any income of a minor shall be clubbed with the
income of his or her parent. How ever, the
income of a physically or mentally handicapped
minor child shall not be included in the income of
either of his or her parents. In such cases the
total income of such minor child shall be
computed separately.
When the income of a minor child is included in the
income of parent, a parent concerned is entitled
to exemption on the income so included or
RS.1500 per minor child , which ever is less
under section 10(32)
The following are the provisions for the
inclusion of the income of minor child in
the income of a parent:
• Where the marriage of his parents
subsists, in the income of that parent
whose total income is greater;
• Where the marriage of his parents does
not subsist, in the income of the parent
who maintains the minor child in the P.Y
Exceptions:
The following income of minor child
shall not be included in the income of the
parent:
1. Income from manual work done by the
minor;
2. Income from activity involving application
of his skill, talent or specialized
knowledge and experience.
9. TRANSFER OF SEPARATE INDIVIDUAL
PROPERTY OR SELF ACQUIRED PROPERTY
TO HUF OF WHICH HE IS A MEMBER OR
CONVERSION OF PROPERTY.(SEC.64(2)
(A)AND(B)).
If, after 31st December
1969, an individual transfers for inadequate
consideration or converts his self-acquired property
into the property of the HUF of which he is a
member, then the income from such property shall
be deemed to be the income of the individual and
not of the HUF. It will be included in the total
income of the individual.
Where such converted property is subsequently
partitioned, the income from such converted
property received by the spouse of the individual
will be includible in the income of the individual who
has converted the property, even after partition.
10. BENAMI TRANSACTIONS.
When a person enters
into a transaction in the name of a person
other than the real person in order to avoid
tax, it is called a benamy transaction, and
the person in whose name the transaction
is affected is called binamdar. If in the
opinion of the accessing officer, a transfer
is benami, he will treat the income of that
transaction as the income of the real
person and tax shall be levied on him for
that transaction. No tax shall be levied on
the benamidar for a benami transaction.
 PROBLEM
Particulars of income of Mr. Amarnath and his family members are
as under

1.SELF INCOME:

A) Rental income from house property 36000

B) Income from business 202000

C) Interest on investment 15200

2. WIFE’S INCOME:

A) Rental income from house property gifted by her father 10000

B) Interest on debentures gifted by her husband in 2004 7000

3. MAJOR SON’S INCOME:
A) salary from a company 184000
B) Rent from house property (the house was gifted by 24000
his father in 2000 when he is a minor.)
4. MINOR SON’S INCOME
A) Salary received for service in a farm 18000
B) Interest on F.D in a bank deposited by his father 12000
5. MINOR DAUGHTER’S INCOME
A) Interest on investment made by her mother in 4000
daughter’s name
B) Rent from house property gifted by her grant father 18000

Compute separately individual gross total income of the family

members keeping in mind clubbing provisions of the income tax act.
 COMPUTATION OF G.T.I OF
MR.AMARNATH
1. IN COME FROM HOUSE
PROPERTY: 36000
Rental income from own house (A.V) 10800
25200
Less:30% of A.V
Rental income of minor daughter (A.V)
(clubbed with father u/s 64(1A)) 18000
Less:30%of A.v 5400 12600
37800
Less: exemption up to RS 1500 U/S 1500
10(32)
36300
TAXABLE INCOME FROM H.P
202000
2. INCOME FROM BUSINESS
3.INCOME FROM OTHER
SOURCES:
I) Interest on investment (own) 15200
II) Interest on debentures in the
name of wife (clubbed u/s(1)(iv)
7000
III) Interest on bank FD in the name
of minor son : 12000
less: exception u/s 10(32) 1500
10500
IV) Interest on investment made in
the name of minor daughter by
her mother but income as it is
greater than of her mother 4000
GROSS TOTAL INCOME 36700
275000
COMPUTATION OF G.T.I OF MRS.AMAR NATH

rental income from house property gifted

by her father (A.V) 10000
LESS: 30% of A.V 3000

GROSS TOTAL INCOME 7000

 COMPUTATION OF GROSS
TOTAL INCOME OF MAJOR SON
1. INCOME FROM SALARY
Salary from a company 184000
2. INCOME FROM HOUSE
PROPERTY
Rent being annual value 24000
Less 30% of annual value 7200 16800

GROSS TOTAL INCOME 200800

 COMPUTATION OF GROSS
TOTAL INCOME OF MINOR SON
SALARY FROM A FIRM 18000
Less deductions nil

GROSS TOTAL INCOME 18000

COMPUTATION OF GROSS TOTAL INCOME OF
MINOR DAUGHTER

Interest on investment made in her name

by her mother included in his father’s
income Nil

Income from house property (gifted by

her grand father included in the grant
total income of father
Nil
GROSS TOTAL INCOME NIL
THANK YOU