Clubbing

of income

(Sec 60- 65 of the Income

Tax Act)
 Introduction
• Generally only assessee’s
income is charged to tax.
• To lighten their tax burden,
transfer huge portions of their TAX
taxable income.
• Sec 60 - 65 enacted
• Provisions apply to income as
well as loss
Income arising from asset not
transferred or from revocable
transfer of asset
 Section
60:
• Transfer of income
without transfer of
asset is deemed to be
the income of the
transferor

• Does not matter if

such transfer is
revocable or
irrevocable
Section 61:
Income
arising out of
revocable
transfer of
assets is
taxed in the
hands of the
transferor
 Section 62:
• Provisions of Sec 61 do not apply:
a) Transfer by way of trust – not
revocable during the lifetime of
transferee
b) Transfer was made before 1.4.61 –
not revocable for a period exceeding
6 yrs.
Section
63:
Definitions :
•Transfer
•Revocable
transfer
 Section 64:
Income arising to spouse, son’s
wife, minor child and HUF to be
clubbed
• Sec 64(1) —spouse and son’s wife
Any remuneration in cash or kind
from a concern in which the
assessee has substantial interest
Asset transferred to spouse/son’s
wife without consideration
Transfer without consideration for
immediate/future benefit of
spouse/son’s wife
Income got from transferred
income that is invested in a
business by spouse/son’s wife
is still transferor’s income.

If there is accretion to the

asset, any income or such
accretion shall not be
Club bing
clubbed.

When transferred asset is

converted to another form,
income derived from such
conversion shall be clubbed.
 Sec 64(1A):
Income of minor child :
Income of minor child clubbed with assessee
Exceptions:
Manual work done by him or
Activity involving application of his skill,
talent or specialized knowledge or
experience
Income of minor child suffering disability
specified in Sec 80
However income earned on investment
made out of the not clubbed income of the
minor child has to be clubbed
Income is clubbed with that of the parent
whose income is higher
Exemption given up to Rs.1500 per child or
the clubbed income whichever is lower.
Child includes step child and an
adopted child of the assessee and
minor married/unmarried daughter

If minor child earns only agricultural

income it is not clubbed with the
parent’s total income for rate purposes

If minor child earns agricultural/non

agricultural income then his income
shall be aggregated to determine tax
rate applicable to the minor.
 Section 64(2):
Income of HUF :

When a member converts/transfers

self acquired property without
consideration into the HUF property,
it is taxed as income of the transferor
member

If converted property is partitioned

among members of the HUF the
income derived from it and received
by the spouse of the transferor will
be taxed in the hands of the
transferor .
 Section 65:
• Levy and collection of tax
• The person in whose name
the asset stands shall be
liable to pay tax if the
assessing officer demands.
• When an asset is held by
more than one person, each
of them will be held jointly
and severally liable to pay tax
on the income derived from
such asset.