CLUBBING OF INCOMES AND AGGREGATION OF INCOMES

Inorder to reduce the tax liability or to avoid tax liability some persons may dispose off their propertyy or
income to some other persons. To counteract such practices income of other persons shall be included in the
assessees total income. Such indusion of other's income in the income 'of the assessee is called clubbing of
income. The income which is so included is called deemed income.
The following income of other persons are included in the assessee's total income as per Sec. 60 to Sec. 65.
Transfer of income without transfer of assets - Sec. 60
If a person transfers his income without transfer of asset, the income from such assets shall be included
in the income of transferor.
Income from assets transferred under 'Revocable Transfer' - Sec. 61
If a person transfers his assets under revocable transfer.the income from such assets shall be included
in the income of transferor.
Revocable Transfer - Sec. 63
It means
) A transfer containing any provision for the re-transfer of he whole or any part of the income or
asset to the transferor, or,
(1i) A transfer which in any way gives the transferor a right to reassume the power over the whole or
any part of the income or asset.
3. Income of Spouse Sec. 64(1) (i)
Thefollowing incomes of1he spouse shall be included in the total income ofthe.individaal: 7te t
a) other forms
Income of the spouse by way of salary,
a firm in which the individual has
fees
commission, or any ofreuneration'froim
substantial interest.
ome from an asset (exchading house property) treneferred kor inadequateconsiderationnd-nst ***

in connection with an agreement to live apart, shall be

included in the total income of the individual..
If the salary, commission, fees, etc. received by the spouse are purely due to the technical or
professional qualification of the spouse, the remuneration paid to the spouse shall notbe clubbedwith
the income ofthe individual.
4. Income of Daughter-in-law (Sec. 64 (1) ()]
If an individual transfers assets to son's wife without adequatë consideration, any income arising from
such assets will be included in the total income of the
transferor.
5. Income from assets transferred to other person or AOP for the benefit of spouse -Sec. 64(1) (vii)
f an individual transfers assets to some other persons and association of persons, without adequate
Consideration, for the immediate or deferred benefit of spouse, any income from such asset will be
included in the total income of the transferor to the extend it is beneficial to the spouse.
6. Income from assets transferred to a person or AOP for thebenefit of daughter-n-law. [Sec.64(1) (vii)|
Any income arising from assets transferred to other persons or AOP, without adequate consideration.
for the immediate or deferred benefit of son's wife shall be inchuded in the total income of transferor.
7. Income of minor child - Sec. 64(1A)
Income of a minor child shall be included in the income of that parent whose total income is greater.
However if the marriage relationship of the parent does not subsist the income of minor child shall be
included in the income of that parent who maintains the minor child. The parent concerned is entitled an
exemption n/s 32 on the income so,included ar"S per, tnoteRd, whichever is ess te
In the
following cases income of a minor child is
not included in the income of parent:
a) ncome of physically or mentally handicapped minor child. ' ** ** *** '

(6) Income from nanual work done by the minor.

cincomie from activity invoiving
appicationof his skil or specialised knowledge.
** * * * * * ******** * * * * * **

a Tncome of maTied dautes

 Income from assets transferred under cross transfer - Sec. 64.

If cross transfers are interconected and are made with the intention of avoiding tax, income from such
asset shall be included in the income of transferor.
Incomes from converted property Sec. 64(2)
Where the individual thiow the self required property into the common stock
of HUF of which he is a
member or transfer it for inadequate consideration, such property is called converted
from such property shall be included in the total income of individual/ttansferor. property. Income

Where such converted property is subsequently

partitioned, the income from such property received by
the spouse of the individual shall be included in the income of the
individual
Benami Transactions
When a person enteres into a transaction in the
name of a person other than the real person in order to
avoid tax, it is called Benami transaction. The
person in whose name transaction is affected is called
Benamidar. Jf the assessing officer thinks a transfer in
benami, the income of that transaction will be
included in the income of real person.

GREGATION OF INCOMES
In computing the
total income of an assessee the following incomes shall also be included in his income.
1) Cash Credit
2) Unrecorded and Unexplained Investments
3) Unrecorded and Unexplained Money
4) Amount of Investments not fully
disclosed in Books of Accounts.
5) Unexplained Expenditure.a cui

SET-OFF AND CARRY FORWARD OF LOSSES

-off of Losses

Adjusting the loss of a year against income of the same year is known as set-off of losses.
The following are the provisions
regarding set-off of losses:
Set-off under the same head (lnter Source
Set-off)
Loss in a source under a head is allowed to be set-off
against income of another source under the same
head during the same year. This is called inter-source
set-off. However, there are certain
to this rule- exceptions
(a) Loss in speculation business is not allowed to be set-off
It is allowed to be set-off
against încome of non-speculation business.
only against speculation gain.
(b) Long-term capital losses are not allowed to be set-off
against short term capital gain. Long term
capital losses can be set-off only against long term capital
gain.
(c) Loss from activity of owning and maintaining horses for race
purposes are allowed to be set-off
only against income of same activity.
(d) Loss from an exempted source cannot be set-off
against any taxable income.
Set-o dgailiSt ncoe vi vuIer neau ulner-ueau sei-öii** * a
If any loss is remaining unadjusted after inter source set off, such unadjusted losses be
agains income ot otier heads during the
can
adjusted
same year. However, t:cre are
ertaii exccptiois?
(a) Loss in speculation business cannot be adjusted against
the income of other heads. Such losses can
be set-off only from spéculation gain.
 (b) Loss in non-speculation business is not allowed to be set-off against income under the head salary.
(c) Capital losses (whether short term or long term) are not allowed to be set-off against income under
any other heads.
(d) Loss
from activity of owning and maintaining horses for race purposes cannot be
any other income.
adjusted against
(e) Any loss is not allowed to be set-off against winning from races, lotteries etc.

3 Speculation Loss
Speculation business losses shall be adjusted
against profits or gain of another speculation business
carried on by the assessee. It is not allowed to be set off
against any other income.
However, losses from non-speculation busines or profession and losses under the head other sources
can be set-off
against speculation gain.
4. Loss from Business or Profession
(other than speculation business)
Any loss from a non-speculation business or
the same head or under
profession can be set-off against any other income under
any other head except 'SALARIES'. The loss of a business discontinued during
the previous be
year can adjusted against the income of another business. If there is any loss, in illegal
business, such loss can be set-off against the income of such business.
5. Losses from the activity of owning and
maintaining race horses.
Such losses in an year can be set off
only against the income of same activity, it is not allowed to be set-
off even from betting in horse races.

6. Capital losses
Short term capital 1losses can be set off against short term capital gain or long term capital gain. However,
long term capital loss can be set off against long term capital gain only. Capital losses are not allowed
to be set-off against income under any other head.
7. Losses of lottery, crossword puzzles, card games, etc. cannot be set-off against any income..

CARRY FORWARD OF LOSSES

f it is not possible to adjust the losses during the same year, such unadjusted losses can be transferred
to subsequent years to adjust against income of those years. This is called carry forward of losses.
The following losses can be carry forward:
1) Loss under the head 'House Property".
2) Loss of non-speculation business or profession.
3) Loss of speculation business.
4) Short-term or long-term capital loss.
5) Loss from activity of owning and maintaining race horses.
1. Loss fromn house property: The unadjusted loss from house property of a year can be carry forward to
the subsequent eight assessment years to be set off from house property income only.
2 Loss of non-speculation business or profession: If the loss of a non-specuiation business remnds
unadjusted such unadjusted losses can be carry forward to the subsequent eight assessment year's. uca
carry forward business losses can be set off only from business income.
. p l Der~rintin
wOC anount of depreciation permissible for a year, is not deductible on account or u

ot, coTne, such unadjusted amount of depreciation is called unabsorbed depreciatio

ill it is fully adjusted. he
aepreciation can be carry forward to the subsequent years
.

Caty ierward unabsorbed depreciation can be adjusted against any income

 brought forward business loss along with unabsorbed deprecialion the order of set of shall be
I here is
as under.
XXX
Business Profit before depreciaion
XX
Current year depreciation
Less:
XXX
forward business !oss XX
Less:
-
Brought
XXX

Less: Brought forward Unabsorbed depreciation XX

XXX
Loss of Speculation Business
off
The unadjusted speculation loss of the yeär can be carry forward to the subsequent year to be
set

against speculation gain oniy. It can be carry torward for the subsequent. four
assessInent year.

Capital Losses
be carry forward to the subsequent 8 assessment years to
The unadjusted capital losses of an ýear can
be set off from STCG
set capital gain only. The carry forward short, term capital losses can
off against
or LTCG but carry forward long term capital loss can be set off only against
LTCG.

5. Losses from Activity of owning and maintaining race horses.

The unadjusted losses of such activity in an year can be carry forward to the subsequent 4 assessment

ycars to be set off against income of same activity.