JAMIA MILLIA ISLAMIA

FACULTY OF LAW

CONCEPT OF CLUBBING OF INCOME IN INCOME TAX ACT, 1961

TAX LAW-I ASSIGNMENT

SUBMITTED BY-

MOHD KAMRAN ANSARI

STUDENT ID: 202004054

CLASS ROLL No.: 40

EXAMINATION ROLL No.: 20BLW039

B.A.LLB. (Hons.) (REGULAR) VI Sem.

BATCH- 2020- 2025

SUBMITTED TO-

PROF. Dr EAKRAMUDDIN MALIK

FACULTY OF LAW, JAMIA MILLIA ISLAMIA

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TABLE OF CONTENTS

INTRODUCTION......................................................................................................................3

CONCEPT OF CLUBBING OF INCOME...............................................................................4

SPECIFIED PERSONS TO CLUB INCOME...........................................................................5

TRANSFER OF INCOME WITHOUT TRANSFER OF AN ASSET TO ANY PERSON

[SECTION 60]...........................................................................................................................7

TRANSFER OF ASSET (REVOCABLE TRANSFER) TO ANY PERSON [SECTION 61]..9

CLUBBING OF THE INCOME OF THE SPOUSE...............................................................10

Income Earned By The Spouse From The Firm/Company In Which The Assessee Has
Substantial Interest [Section 64(1)(ii)]................................................................................10

Income From The Asset Transferred To The Spouse Against Inadequate Consideration
[Section 64(1)(iv)]...............................................................................................................12

Transfer Of Assets For The Benefit Of The Spouse [Section 64(1)(Vii)].............................14

CLUBBING OF INCOME OF SON’S WIFE.........................................................................14

Income Arising To The Son’s Wife From The Assets Transferred Without Adequate
Consideration By The Father-In-Law Or The Mother-In-Law [Section 64(1)(Vi)]............15

Transfer Of Assets For The Benefit Of Son’s Wife [Section 64(1)(viii)]..............................15

CLUBBING OF INCOME OF MINOR CHILD.....................................................................16

Clubbing Of Income Of A Major Child...............................................................................17

CLUBBING OF INCOME FROM HUF PROPERTY [SECTION 64(2)]..............................17

CONCLUSION........................................................................................................................18

BIBLIOGRAPHY....................................................................................................................19

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INTRODUCTION

“Taxation is the price which civilized communities pay for the opportunity of remaining
civilized.” -Albert Bushnell Hart

A taxpayer in India should pay income tax on all the incomes that he earns during the
financial year. However, in certain special cases, the income of other person is included (i.e.
clubbed) in the taxable income of the taxpayer. In such cases, the taxpayer is liable to pay tax
on his income and the income of other people. The situation in which the income of another
person is included in the income of the taxpayer is called clubbing of income.

For example, in the case of individuals, income tax is levied on a slab system on the total
income. The tax system is progressive i.e., as the income increases, the application rate of tax
increases. Some taxpayers in the higher income bracket have a tendency to divert some
portion of their income to their spouse, minor child, etc. to minimise their tax burden. In
order to prevent such tax avoidance, clubbing provisions have been incorporated in the Act,
under which income arising to certain persons (like spouse, minor child etc) have to be
included in the income of the person who has diverted his income for the purpose of
computing tax liability.

A taxpayer should follow the provisions for clubbing of income as per Section 64 of the
Income Tax Act.1 The taxpayer should report the total income including such income while
filing ITR on the income tax website. It was held in the case of CIT v. P. Doraiswamy Chetty2
that income for the purpose of Sec. 64 includes losses.

Transferring of house property to family members or making investments in the name of wife
or children or paying salary to the wife from an entity where the husband is the owner, etc.
are some of the commonly used devices or tricks to reduce the tax strain. However, due to a
lack of knowledge of provisions relating to ‘clubbing of income’ given in the Income Tax
Act, of 1961, these attempts to save tax by common man ends in fiasco.

The consequences of each transaction entered into by the taxpayer:

 Transfer of Income: If a person transfers income from any asset to wife, children or
a relative under a settlement, trust or agreement without the actual transfer of the asset
then such income shall be included in the total income of the transferor. This rule

1
Income Tax Act, 1961, s. 64.
2
183 ITR 559 (SC).

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 applies even if such agreement to transfer the income was entered into prior to the
Income Tax Act.
 Transfer of assets for insufficient consideration: When a person transfers his asset
in the name of his wife, for an insufficient consideration, the clubbing provision will
come into effect. Under such circumstances, the income arising from such asset is
clubbed in the income of the transferor. Example: If the husband invests Rs. 3 lakhs in
Fixed Deposits in the name of his spouse, the interest earned from such FD shall be
clubbed with the income of husband. In case of transfer of house property by the
owner to his or her spouse for inadequate consideration, the transferor will remain the
deemed owner. As a result, the income arising from such house property is taxed in
the hands of transferor. When any asset is transferred to wife for a consideration, be it
adequate or inadequate the provisions of clubbing of income is not applicable. Hence,
the income from the asset transferred is deemed to be the income of the transferee and
is subject to taxation.
 Remuneration or reward from a firm in which spouse has substantial interest:
When a person receives reward by way salary, fees, commissions or in any other form
in cash or kind from a firm in which his or her spouse has major interest (20% or
more), then such income is merged with the income of spouse. Such clubbing
provision applies if income is received without any qualification (professional or
technical). If the person has the required technical or professional qualification for the
job, then the income shall not be clubbed with the income of spouse.

CONCEPT OF CLUBBING OF INCOME

Clubbing of income means the income of another person included in the assessee’s total
income. The tax provisions for clubbing of income are defined under various Sections of the
Income Tax Act. This means that a person cannot divert his income to any other person. For
example: If the income of the spouse is included in the total income and the assessee ends up
paying tax on his/her income and the spouse’s income too, then this is known as clubbing of
income.

However, there would not be any clubbing of the income, earned from the investment of
clubbed income. For example, Hari transfers INR 10,000 to his wife Priya and Priya invests
the money in an FD scheme. The FD interest will get clubbed in total income of Hari and he

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is liable to pay tax on it. However, if Priya re-invests the interest earned (i.e. clubbed income)
in some FD or any other investment scheme then the income from such re-investment would
be taxable in the hands of Priya only. This interest income from reinvestment is not subject to
clubbing provisions. Thus, Hari is not liable to pay tax on the same.

SPECIFIED PERSONS TO CLUB INCOME

SECTION SPECIFIED SPECIFIED CLUBBING OF INCOME

PERSON SCENARIO

SECTION 60 Any Person Transfer of Income Any income from such

without transfer of asset will be clubbed in the
Assets either by way of hands of the transferor.
an agreement or any Irrespective of whether
other way such transfer is revocable or
not.

SECTION 61 Any Person Transferring asset on Any income from such

the condition that it can asset will be clubbed in the
be revoked hands of the transferor
SECTION Minor Child Any income arising or Income will be clubbed in
64(1A) accruing to the person’s the hands of higher-earning
minor child [Child parent.
includes step child, Note:
adopted child, and If marriage of child’s
minor married parents does not subsist,
daughter] 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
INR 1,500 is allowed to the
parent.

Exceptions to clubbing
Income of a disabled child
(disability of the nature
specified in section 80U)

Income earned by manual

work done by the child or
by activity involving

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 application of his skill and
talent or specialized
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 the spouse receives Income shall be clubbed in
64(1)(III) any remuneration the hands of the taxpayer or
irrespective of its spouse, whose income is
nomenclatures such greater (before clubbing).
as Salary, commission,
fees, or any other form The exception to clubbing:
and by any mode i.e., –Clubbing is not applicable
cash or in-kind from if the spouse possesses
any concern in which technical or professional
you have a substantial qualifications in relation to
interest 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 Income from assets that Income from out of such
64(1)(IV) taxpayer transfers asset is clubbed in the
directly or indirectly to hands of the transferor.
the spouse without Provided the asset is other
adequate consideration than the house property.

Exceptions to clubbing i.e.

no clubbing of income in
the following cases:

a. Where the spouse

receives the asset as part of
the divorce settlement

b. If the taxpayer transfers

the asset before marriage

c. No husband and wife

relationship subsists on the
date of accrual of income

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 SECTION Daughter-in-law Income from the assets Any income from such
64(1)(VI) that taxpayer transfers assets transferred is clubbed
to son’s wife for in the hands of the
inadequate transferor
consideration
SECTION Any person or Transferring any assets Income of taxpayer shall
64(1)(VII) Association of directly or directly for include income from such
persons inadequate assets
consideration to any
person or AOP to
benefit the daughter-in-
law either immediately
or on a deferred basis
SECTION Any person or Transferring any assets Income of taxpayer shall
64(1)(VIII) association of directly or directly for include income from such
persons inadequate assets
consideration to any
person or association of
persons to benefit the
spouse either
immediately or on a
deferred basis
SECTION Hindu Divided In case, a member of Income of taxpayer shall
64(2) Family (HUF) HUF transfers his include income from such
individual property to property
HUF for inadequate
consideration or
converts such property
into HUF property

TRANSFER OF INCOME WITHOUT TRANSFER OF AN ASSET TO

ANY PERSON [SECTION 60]

Clubbing applies when the transferor transfers the income to some other person without
transferring the ownership of the asset from which the income arises. As per provisions for
clubbing of income, the total income of the transferor shall include such income and he must
pay tax on it.

It is immaterial whether the transfer is revocable or irrevocable and whether it was made
before or after the commencement of this Act. Sec. 60 does not apply when corpus itself is
transferred.3

3
CIT v. Grandhi Narayana Rao,173 ITR 593 (AP).

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The expression “revocable” is not qualified in any manner. The section does not speak of an
absolute or unqualified power of revocation. If there is an income arising by virtue of a
transfer of assets which is revocable, then that income must be deemed to be the income of
the assessee. The only question that has got to be asked is whether the trust deed is capable of
being revoked. Thus, where in the case of a trust created by father and mother for the benefit
of their children, the trust deed provided that the father could revoke the deed with the
consent of the mother and any two of his three children, it was held that the trust was
revocable.4

In the case of CIT v. Keshavji Morarji5 the Supreme Court held that if two transactions are
interconnected and are parts of the same transaction in such a way that it can be said that the
circuitous method was adopted as a device to evade tax, the implication of clubbing
provisions would be attracted.

Section 606 is applicable if the following conditions are satisfied –

 The Taxpayer owns an assets.

 The ownership of assets is not transferred by him.
 The Income from the assets is transferred to any person under a settlement, or
agreement.

If the above conditions are satisfied, the income from the assets would be taxable in the hands
of the transferor.

Example:

 Patrick Bateman confers the right to receive rent in respect of his house property to
his friend Paul Allen, without transferring the house itself to him. In this case, the rent
received by Patrick Bateman will be clubbed with the income of Paul Allen.
 Andrew owns a property. He transfers the rent income to his wife Greta without
transferring the ownership of the property. As per the provisions for clubbing of
income, this is a transfer of income without the transfer of an asset. Therefore,
Andrew is liable to pay tax on such rental income.

4
Behramji Sorabji Lalkaka v. CIT, [1948] 16 ITR 301 (Bom.)
5
(1967) 66 ITR 142.
6
Income Tax Act, 1961, s. 60.

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TRANSFER OF ASSET (REVOCABLE TRANSFER) TO ANY PERSON
[SECTION 61]

Revocable transfer means the transferor of assets assumes a right to re–acquire asset or
income from such an asset, either whole or in parts at any time in future, during the lifetime
of the transferee. It also includes a transfer which gives a right to re-assume power of the
income from an asset or asset during the lifetime of the transferee. If the following conditions
are satisfied Section 617 will become applicable.

 An asset is transferred under a “Revocable Transfer”.

 The Transfer for this purpose includes any settlement or agreement. Then any income
from such an asset is taxable in the hands of the transferor.

The meaning of “Revocable Transfer” is defined u/s 638 as:

Transfer is deemed to be revocable if:

 it contains any provision for the retransfer, directly or indirectly, of the whole or any
part of the income or assets to the transferor, or
 it gives, in any way to the transferor, a right to reassume power, directly or indirectly,
over the whole or any part of the income or the assets.

In CIT v. S Raghbir Singh,9 it was held that, if there is a provision to reassume power, the
transfer will be revocable, actual exercise of power is not necessary.

In C.T. Senthilnathan Chettiar v. State of Madras,10 it was held that, where the assessee can at
any time reassume power over the assets or the income by just cancelling r altering the terms
of the deed, trust was “revocable”.

In V. Venugopala Varma Rajah v. CIT,11 the Apex Court ruled that where no absolute right is
given to transferee and the asset can revert back to transferor in certain circumstances,
transfer is revocable.

Exceptions to Section 61:

7
Income Tax Axt, 1961, s. 61.
8
Income Tax Act, 1961, s. 63.
9
[1965] 57 ITR 508 (SC).
10
[1968] 67 ITR 102 (SC).
11
[1972] 84 ITR 466 (SC).

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  Transfer not revocable during the lifetime of the beneficiary or the transferee: If
there is a transfer by way of trust which is not revocable during the lifetime of the
beneficiary and in case of any other transfer, not revocable during the lifetime of the
transferee, the income from the transferred asset is not includible in the total income
of the transferor provided the transferor derives no direct or indirect benefit from such
income.
If the transferor receives direct or indirect benefit from such income, such income is
to be included in his total income even though the transfer may not be revocable
during the life time of the transferee.

 Transfer made before April 1, 1961 and not revocable for a period exceeding six
years: Income arising from the transfer of an asset before 01.04.1961, which was not
revocable for a period exceeding six years, is not includible in the total income of the
transferor provided the transferor does not derive direct or indirect benefit from such
income.

Example: 

 Andrew transfers the rental income as well as the property to his wife, Greta, with the
condition that he can re-acquire the property whenever he wishes. This is a situation
of revocable transfer and the rental income is taxable in the hands of Andrew only.

CLUBBING OF THE INCOME OF THE SPOUSE

INCOME EARNED BY THE SPOUSE FROM THE FIRM/COMPANY IN WHICH THE ASSESSEE
HAS SUBSTANTIAL INTEREST [SECTION 64(1)(II)]12

Remuneration in cash or in kind to spouse from a concern in which the individual has
substantial interest be clubbed: In computing the total income of any individual, all such
income which arise, directly or indirectly, to the spouse of such individual by the way of
salary, commission, fees or any other form of remuneration, whether in cash or in kind, from
a concern in which such individual has a substantial interest shall be included.

Meaning of Substantial Interest

12
Income Tax Act, 1961, s. 64(1)(ii).

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  Individual either himself or with a relative/s beneficially own shares having 20% or
more of voting power in a company

 Individual either himself or with a relative/s is entitled to 20% or more of profits in a

firm

Clubbing provisions will not apply where remuneration is received on account of

technical or professional qualifications: Clubbing provisions, however, do not apply where
the spouse of the said individual possesses technical or professional qualifications and the
income to the spouse is solely attributable to the application of his/her technical or
professional knowledge or experience. In such an event, the income arising to such spouse is
to be assessed in his/her hands.

Both husband and wife have a substantial interest in a concern: Where both husband and
wife have a substantial interest in a concern and both are in receipt of income by way of
salary etc. from the said concern, such income will be includible in the hands of that spouse,
whose total income excluding such income is higher.

However, the remuneration arises to the spouse is solely attributable to the application of
technical or professional qualification, knowledge and experience of the spouse, such
remuneration will not be clubbed.13 The word “technical or professional qualification” do not
necessarily relate to technical or professional qualifications acquired by obtaining a
certificate, diploma or a degree or in any other form from a recognised body like a university
or an institute.14 It is therefore, necessary to consider the term “technical and professional
qualifications and experience” in the context of the facts which are required to be considered
in a given case. Regard must , therefore, be had to the nature of the business carried on by the
concern and the mind of technical or professional qualifications, knowledge and experience
possessed by the spouse to whom the payment is made from the concern for the services
rendered by that person.15

NOTE:

13
Yashwant Chhajta v. CIT, [2013] 214 Taxmann 280 (HP).
14
Batta Kalyani v. CIT, [1985] 101 Taxmann 350 (Mad.).
15
CIT v. R. Jayalakshmi, [1998] 101 Taxmann 350 (Mad.).

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  The term 'relative' in relation to an individual means the husband, wife , brother or
sister or any lineal ascendant or descendant of that individual [Section 2(41)).16
 Where any such income is once included in the total income of either spouse, income
arising in the succeeding year shall not be included in the total income of the other
spouse unless the Assessing Officer is satisfied, after giving that spouse an
opportunity of being heard, that it is necessary to do so.

Example: 

 Andrew holds 51% of the shares in a private limited company. His wife Greta is
getting a salary of Rs. 20,000 per month from the same company. She is not an active
employee and does not contribute to the company’s operations. Andrew’s total annual
income is Rs. 10,00,000 whereas Greta’s total income (excluding salary from the
company) is Rs. 5,00,000. In this situation, Andrew’s total income shall include
Greta’s salary of INR 2,40,000 and he shall be liable to pay tax on INR 12,40,000.

INCOME FROM THE ASSET TRANSFERRED TO THE SPOUSE AGAINST INADEQUATE

CONSIDERATION [SECTION 64(1)(IV)]17

Transfer of asset (other than house property): Where there is a transfer of an asset (other
than house property), directly or indirectly, from one spouse to the other, without adequate
consideration or otherwise than in connection with an agreement to live apart, any income
arising to the transferee-spouse from the transferred asset, either directly or indirectly, shall
be included in the total income of the transferor-spouse.

Transfer of house property: In the case of transfer of house property, the provisions are
contained in Section 27.18 If an individual transfers a house property to his spouse, without
adequate consideration or otherwise than in connection with an agreement to live apart, the
transferor shall be deemed to be the owner of the house property and its annual value will be
taxed in his hands.

Income from the accretion of the transferred asset: It may be noted that any income from
the accretion of the transferred asset is not to be clubbed with the income of the transferor.

16
Income Tax Act, 1961, s. 2(41).
17
Income Tax Act, 1961, s. 64(1)(iv).
18
Income Tax Act, 1961, s. 27.

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i.e., the income arising on transferred assets alone has to be clubbed. However, income
earned by investing such income (arising from transferred assets) cannot be clubbed.

Meaning of adequate consideration: It is also to be noted that natural love and affection do
not constitute adequate consideration. Therefore, where an asset is transferred without
adequate consideration, the income from such asset will be clubbed in the hands of the
transferor.

Transferred asset invested in business: Where the assets are transferred, directly or
indirectly, by an individual to his spouse are invested by the transferee in the business,
proportionate income arising from such investment is to be included in the total income of the
transferor. If the investment is the nature of the contribution of capital, proportionate interest
on capital will be clubbed with the income of the transferor.

Natural love and affection may be a good consideration but that would not be adequate
consideration for the purpose of this section 64 (1).19 The relationship of husband and wife
should subsist both at the time of transfer of asset and at the time when income is accrued in
order to attract clubbing provision. It means that transfer of asset before marriage is outside
the scope of this section. Similarly , if transferor– spouse dies, the income , though continued
to be enjoyed by the transferee, cannot be included in the income of deceased transferor, heir,
administrator or executor , as widow or widower is not a spouse.20

The word “spouse “ does not include illegal wife. 21 Wife , in these provisions , means a
lawfully wedded wife and child, a legitimate child. Income of a prospective wife or an
illegitimate child is not affected by these provisions.22

NOTE:

 Such proportion has to be computed by taking into account the value of the aforesaid
investment as on the first day of the previous year to the total investment in the
business or by way of capital contribution in a firm as a partner, as the case may be,
by the transferee as on that day.

Examples:

19
Tulsidas Kilachand v. CIT, [1961] 4 ITR (SC).
20
Vinodkumar Ratilal v. CIT, [1975] 100 ITR 564 (Guj.).
21
Executors of will of T.V. Krishna Iyer v. CIT [1966] 38 ITR 144(Ker).
22
Thomas (P.J.P) v. CIT, [1962] 44ITR 897 (Cal)

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  Tristan transfers an asset worth INR 1,50,000 to his wife for a consideration of INR
50,000. Tristan’s total income shall include 2/3rd (two-thirds) of the income from the
asset and he would be liable to pay tax on this income. However, the balance 1/3rd
will be taxable in the hands of his wife, Meghan, as she has paid INR 50,000 being
1/3rd (one-third) of the value of the property.
 Tristan gifted INR 5,00,000 to his wife, Meghan. She invested this amount in the
fixed deposit and received interest of 4,500 INR p.a. (Gift received from husband is
exempt in the hands of his wife.) Since Meghan converts the cash (asset) received into
another asset (FD), the interest she earns of INR 4,500 would be clubbed in the
income of Tristan as per Section 64(1)(iv) of the Income Tax Act.

In R Dalmia v. CIT23 and a few other judgments, pin money (i.e. an allowance given to the
wife by her husband for her personal and usual household expenses) is not taxable. Further, if
the spouse acquires the asset out of pin money, then the provisions of clubbing of income
shall not apply.

TRANSFER OF ASSETS FOR THE BENEFIT OF THE SPOUSE [SECTION 64(1)(VII)]24

All income directly or indirectly to any person or association of persons, for the assets
transferred, directly or indirectly, to such person or association of persons, by an individual
without adequate consideration is includible in the income to the extent such income is used
by the transferee for the immediate or deferred benefit f the transferer’s spouse.

CLUBBING OF INCOME OF SON’S WIFE

INCOME ARISING TO THE SON’S WIFE FROM THE ASSETS TRANSFERRED WITHOUT
ADEQUATE CONSIDERATION BY THE FATHER-IN-LAW OR THE MOTHER-IN-LAW
[SECTION 64(1)(VI)]

23
AIR 1977 SC 2394.
24
Income Tax Act, 1961, s. 64(1)(vii).

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Assets transferred without adequate consideration: Where an asset is transferred, directly
or indirectly, by an individual to his or her son’s wife without adequate consideration, the
income from such asset is to be included in the total income of the transferer. If the taxpayer
transfers assets to son’s wife for inadequate consideration, the total income would include the
income that their son’s wife earns on the said asset. The taxpayer is liable to pay tax on the
total income as per the provisions of clubbing of income.

Assets transferred invested in business: For this purpose, where the asset transferred
directly or indirectly by an individual to his or her son’s wife are invested by the transferee in
the business, proportionate income arising from such investment is to be included in the total
income of the transferor. If the investment is in the nature of contribution of capital, the
proportionate interest on capital will be clubbed with the income of the transferor.

When a taxpayer transfers an asset for the benefit of son’s wife for inadequate consideration,
their total income shall include the income that arises out of such asset and they are liable to
pay tax on the same.

NOTE:

 Such proportion has to be computed by taking into account the value of the aforesaid
investment as on the first day of the previous year to the total investment in the
busiess or by the way of capital contribution in a firm as a partner, as the case may be,
by the transferee as on that day.
 Clubbing would be applicable only when the relationship with the spouse and son’s
wife exists both at the time of transfer of asset and at the time earning of income.

TRANSFER OF ASSETS FOR THE BENEFIT OF SON’S WIFE [SECTION 64(1)(VIII)]

All income arising directly or indirectly, to any person or association of persons from the
assets transferred, directly or indirectly, without adequate consideration, to such person or
association of persons by an individual will be included in the total income of the individual
to the extent such income is used by the transferee for the immediate or deferred benefit of
the transferor's son's wife.

NOTE:

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  Where any asset is transferred by any person to any person without consideration or
for inadequate consideration, the provisions of Section 56(2)(x)25 would get attracted
in the hands of transferee, if conditions specified thereunder are satisfied.
 In order to attract the clubbing provisions under Section 64(1)(viii), the transfer
should be otherwise than for adequate consideration. In this case, it is presumed that
the transfer is otherwise than for adequate consideration and therefore, the clubbing
provisions are attracted.

CLUBBING OF INCOME OF MINOR CHILD

 All income of a minor is to be included in the income of his or her parent.

 However, the income derived by the minor from manual work or from any activity
involving his skill, talent or specialised knowledge or experience will not be included
in the income of his parent.
 The income of the minor will be included in the income of that parent, whose total
income, excluding minor's income, is greater.
 Once clubbing of minor's income is done with that of one parent, it will continue to be
clubbed with that parent only, in subsequent years. The Assessing Officer, may,
however, club the minor's income with that of the other parent, if, after giving the
other parent an opportunity to be heard, he is satisfied that it is necessary to do so. (v)
Where the marriage of the parents does not subsist, the income of the minor will be
includible in the income of that parent who maintains the minor child in the relevant
previous year.
 However, the income of a minor child suffering from any disability of the nature
specified in Section 80U26 shall not be included in the hands of the parent but shall be
assessed in the hands of the child.
 It may be noted that the clubbing provisions are attracted even in respect of income of
minor married daughter.

Exemption:

25
Income Tax Act, 1961, s. 56(2)(x).
26
Income Tax Act, 1961, s. 80U.

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  In case the income of an individual (i.e. the parent) includes the income of his minor
child in terms of section 64(1A), 27 such parent shall be entitled to an exemption of Rs.
1,500 in respect of each minor child. However, if the income of any minor so
includible is less than Rs. 1,500, then, the entire income shall be exempt.28
 In case of transfer of house property to married minor daughter, the clubbing will not
apply here. Hence any income generated by House property would not be taxable in
the hands of Parents.

CLUBBING OF INCOME OF A MAJOR CHILD

There will not be any clubbing of the income earned by a major child (18 years and above)
with the total income of the parents. Whether the major child is earning using his own
specialization/skill or on investment of money or asset transferred to him by his Parents.

Example: Andrew who is 18 years old gets Rs. 50,000 as a gift from his Father, Emery. He
invests the money in an FD scheme. Now the interest income on FD would be taxable in the
hands of Andrew only. The provisions of clubbing of income will not apply in this case.

CLUBBING OF INCOME FROM HUF PROPERTY [SECTION 64(2)]

Section 64(2)29 deals with the case of conversion of self-acquired property into property of a
Hindu undivided family.

 Where an individual, who is a member of the HUF, converts at any time after
31.12.1969, his individual property into property of the HUF of which he is a member
or throws such property into the common stock of the family or otherwise transfers
such individual property, directly or indirectly, to the family otherwise than for
adequate consideration, the income from such property shall continue to be included
in the total income of the individual.
 Where the converted property has been partitioned, either by way of total or partial
partition, the income derived from such converted property as is received by the
spouse on partition will be deemed to arise to the spouse from assets transferred

27
Income Tax Act, 1961, s. 64(1A).
28
Income Tax Act, 1961, s. 10(32).
29
Income Tax Act, 1961, s. 64(2).

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 indirectly by the individual to the spouse and consequently, such income shall also be
included in the total income of the individual who effected the conversion of such
property.
 Where income from the converted property is included in the total income of an
individual under Section 64(2), it will be excluded from the total income of the family
or, as the case may be, of the spouse of the individual.

CONCLUSION

The following conclusions can be drawn out of clubbing of income under income tax act,
1961-

Talking about section 60 (transfer of income without transfer of asset) and section
61(revocable transfer of asset), there is an asset which is transferred under a “revocable
transfer”. Income from the aforesaid asset is taxable in the hands of transferor. Such income
is taxable as and when the power to revoke arises. This rule is applicable even if the power to
revoke has not been exercised so far.

Clubbing of income in a broad aspect plays a crucial role in collection of revenue via. Income
Tax. The provisions are very much suitable to prevent any partiality and hence secures the
article 14 of the constitution of India (right to equality) by not differentiating between a
person earning 15 lakhs per annum and a couple who earns 8 and 7 lakhs per annum. By
virtue of the section 60 to 64 of income tax act, 1961 both have to pay equal taxes to the
government.

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BIBLIOGRAPHY

BOOKS:

 Dr. Vinod K. Singhania and Dr. Monica Singhania, Student’s Guide to Income Tax
Act Including GST, Taxmann, 60th Edition, 2019-20.
 Singhania Vinod k., “Taxmann Student’s guide to Income Tax”, 51st edition, 2014-
2015.
 The Income-Tax Act, 1961 (43 of 1961) as amended by The Finance Act 2019,
Professional Book Publishers, 2019-20.
 IP Gupta “International Law in Relation to Double Taxation of Income (With
Particular Reference to India)”, 2007, LexisNexis Butterworths, New Delhi, India.
 Pithisaria & Pithisaria, “Direct Taxes Circular (1922-2011)”, Volume 1, 2011.

ONLINE JOURNALS & ARTICLES

 Clubbing of Income under Income Tax Act, 1961, Tax Guru. Available at:
https://taxguru.in/income-tax/clubbing-of-income-under-the-income-tax-act-
1961.html
 Clubbing Of Income To Individual Section 60 64 Income Tax Act, Simple Tax India.
Available at: https://www.simpletaxindia.net/2012/07/clubbing-of-income-individual-
section.html

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