Chart Explaining Income Tax Provisions related to

Clubbing of income
SECTIONS NATURE OF CLUBBED IN THE HANDS OF CONDITIONS/EXCEPTION RELEVANT
TRANSACTION REFERENCE
SECTION 60 Transfer of Transferor who transfers the Irrespective of: 1.Income for
Income without income
1. Whether such transfer is purpose of Section
transfer of Assets.
revocable or not. includes losses.
2. Whether the transfer is Doriswamy Che
effected before or after the [also see Expl. (2
commencement of IT Act. Section 64]
2. Section 60 does
apply if corpus itse
transferred. [Gra
Narayana Rao2]
SECTION 61 Revocable Transferor who transfers the Clubbing not applicable if: Transfer held
transfer of Assets. Assets.
1. Trust/ transfer irrevocable revocable
during the lifetime of 1. If there is provi
beneficiaries/ transferee or to re-transfer dire
2. Transfer made prior to 1-4- or indire
1961 and not revocable for a
whole/part
period of 6 years. Provided the
transferor derives no direct or income/asset
indirect benefit from such
transferor;
income in either case
2. If there is a righ
reassume po
directly or indire
the transfer is
revocable and ac
exercise is
necessary. [S. Rag
Singh]3
3. Where no abso
right is given
transferee and a
can revert to transf
in prescr
circumstances, tran
is held revoca
[Jyotendrasinhji vs
I. Tripathi.4
SECTION .Salary, Spouse whose total income Clubbing not applicable if: 1. The relationship
1
183 ITR 559 (SC)
2
173 ITR 593 (AP)
3
57 ITR 408 (SC)
4
201 ITR 611 (SC)
 64(1)(II) Commission, Fees (excluding income to be clubbed) Spouse possesses technical or husband and wife m
or remuneration is greater. professional qualification and
subsist at the time
paid to spouse remuneration is solely
from a concern in attributable to application of accrual of the inco
which an that knowledge/ qualification.
[Philip John Pla
individual has a
substantial* Thomas]5
interest.
2. Income other
salary, commiss
fees or remuneratio
not clubbed under
clause.

SECTION Income from Individual transferring the Asset. Clubbing not applicable if, The 1. Income earned
64(1)(IV) assets transferred
assets are transferred; of Income arising f
directly or
indirectly to the 1. With an agreement to live transferred assets
spouse without
apart. liable for clubbed.6
adequate
consideration. 2. Before marriage. 2. Cash gifted
3. Income earned when relation spouse and he
does not exist. invests to earn inte
4. By Karta of HUF gifting co- [Mohini Thaper
parcenary property to his wife. CIT]7
L. Hirday Narain vs. ITO 78 3. Capital gain on
of property which
ITR 26 (SC)
received wit
5. Property acquired out of pin consideration f
money. [R.B.N.J. Naidu vs. spouse [Sevential
CIT 29 ITR 194 (Nag.)] Sheth vs. C
Transaction must
real. [O
Mohindroo]9
SECTION Income from the Individual transferring the Asset. Condition: The transfer should Cross transfers are
64(1)(VI)
assets transferred be without adequate covered
to son’s wife. consideration. [C.M.Kothari]10

SECTION Transfer of assets Individual transferring the Asset. Condition: 1. The transfer 1. Transferor need
by an individual
64(1)(VII), should be without adequate necessarily h
to a person or
(VIII) AOP for the consideration. taxable income of
immediate or
own. [P. Murugesan
deferred benefit
of his: (vii) – 2. Wife means leg
Spouse. (viii) –
wedded w
Son’s wife.
[Executors of the

5
49 ITR 97 (SC)]
6
M.S.S. Rajan 252 ITR 126 (Mad)
7
83 ITR 208 (SC)
8
68 ITR 503 (SC)]4.
9
99 ITR 583 (Delhi)
10
49 ITR 107 (SC)]
11
245 ITR 301 (Mad)
 of T.V. Krishna Iy

SECTION Income of a 1. If the marriage subsists, in the Clubbing not applicable for:— 1. Income out
64(1A) minor child
hands of the parent whose total 1. Income of a minor child property transfe
[Child includes
step child, income is greater; or; suffering any disability for no consideratio
adopted child and
2. If the marriage does not subsist, specified u/s. 80U. a minor mar
minor married
daughter]. in the hands of the person who 2. Income on account of daughter, shall no
maintains the minor child. manual work done by the clubbed in the pare
3. Income once included in the minor child. hands. [Section 27]
total income of either of parents, it
3. Income on account of any 2. The parent in wh
shall continue to be included in the
activity involving application hands the min
hands of some parent in the
of skills, talent or specialized income is clubbed
subsequent year unless AO is
knowledge and experience. entitled to
satisfied that it is necessary to do
exemption up to
so (after giving that parent
1,500 per ch
opportunity of being heard)
[Section 10(

SECTION Income of HUF Income is included in the hands of Clubbing applicable even if: Fiction under
from property
64(2) individual & not in the hands of The converted property is section must
converted by the
individual into HUF. subsequently partitioned; extended
HUF property.
income derived by the spouse computation of inc
from such converted property also. [M.K. Kuppu
will be taxable in the hands of
individual.

12
38 ITR 144 (Ker)]
13
127 ITR 447 (Mad)]
An individual shall deemed to have substantial interest in a concern for the purpose of
Section 64(1)(ii)

IF THE CONCERN IS A COMPANY IF THE CONCERN IS OTHER THAN A

COMPANY

Person’s beneficial shareholding should not be less
than 20% of voting power either individually or
jointly with relatives at any time during the Previous
Year. (Shares with fixed rate of dividend shall not be
considered).
Person either himself or jointly with his relatives is
entitled in aggregate to not less than 20% of the
profits of such concern, at any time during the
previous year.

Note: The clubbed income retains the same head under which it is earned.
In the following situations, money that technically belongs to another person is counted as the
assessee's (Clubbing of money) under sections 60–64 of the Income-tax Act, 1961.14

Section 60:15 Income transfer without asset transfer.

Income transferred to another without the underlying asset being transferred is considered to
have been transferred by the transferor and must be included in the transferor's total income
regardless of whether the transfer was revocable or not and regardless of when the transfer
was made in relation to the effective date of the Income-tax Act, 1961.

For instance, let's say X rents out his home for Rs.10,000 per month, and he decides that
going forward, Y would get all of the rent money but X will still own the house outright.

Since just money is being transferred here and not the asset itself, X's total income should
include the proceeds from the rental agreement.

Section 61:16 Irrevocable Transfer of Assets

If an individual makes a revocable transfer of property to another, the recipient is entitled to

none of the revenue generated by the transferred property.

14
Clubbing of Income under Income Tax Act, 1961
https://taxguru.in/income-tax/clubbing-of-income-under-the-income-tax-act-1961.html
15
§60: The Income-Tax Act, 1961- Transfer of income where there is no transfer of assets.—All income arising
to any person by virtue of a transfer whether revocable or not and whether effected before or after the
commencement of this Act shall, where there is no transfer of the assets from which the income arises, be
chargeable to income-tax as the income of the transferor and shall be included in his total incom
16
§61: The Income-Tax Act, 1961- Revocable transfer of assets.—All income 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.
If the transfer is irreversible for a limited time [Section 62] 17, then Section 61 does not
apply.

Under certain conditions, the revocable transfer requirements of Section 61 do not apply per
Section 62(1). In such a case, it would be—

If the transfer is made by trust, it cannot be revoked during the beneficiary's lifetime; if the
transfer is made in any other manner, it cannot be revoked during the transferee's lifetime;
and if the transfer was made prior to January 1, 1961, it cannot be revoked for a period of
more than six years.

If the transferor receives no advantage, either direct or indirect, from the money in question,
then the aforementioned exemptions apply. All of the foregoing mean that the recipient of the
funds will be responsible for paying taxes on the income.

Revocability of Transfers [Section 63]18:

For the purposes of sections 60, 61, and 62, a transfer is considered revocable if section 63
specifies that it is so because it includes a provision for the re-transfer, directly or indirectly,
of the whole or any part of the income or assets to the transferor during the lifetime of the
beneficiary or the transferee as the case may be, or because it grants the transferor the right to
reassume power, directly or indirectly, over the whole or any part of the

Five, a person's income is considered to include that of their spouse, young children, etc.
[Chapter 64]

Compensation received by one spouse from a business in which the other spouse has a
significant financial stake [Section 64(1)(ii)]:

17
§62: The Income-Tax Act, 1961- Transfer irrevocable for a specified period. — (1) The provisions of section
61 shall not apply to any income arising to any person by virtue of a transfer—
(i) by way of trust which is not revocable during the lifetime of the beneficiary, and, in the case of any
other transfer, which is not revocable during the lifetime of the transferee; or
(ii) (ii) made before the 1st day of April, 1961, which is not revocable for a period exceeding six years:
Provided that the transferor derives no direct or indirect benefit from such income in either case.
(2) Notwithstanding anything contained in sub-section (1), all income arising to any person by
virtue of any such transfer shall be chargeable to income-tax as the income of the transferor as and
when the power to revoke the transfer arises, and shall then be included in his total income.
18
§63: The Income-Tax Act, 1961-“Transfer” and “revocable transfer” defined. —For the purposes of sections
60, 61 and 62 and of this section,— (a) a transfer shall be deemed to be revocable if— (i) it contains any
provision for the re-transfer directly or indirectly of the whole or any part of the income or assets to the
transferor, or (ii) it, in any way, gives the transferor a right to re-assume power directly or indirectly over the
whole or any part of the income or assets ; (b) “transfer” includes any settlement, trust, covenant, agreement or
arrangement
All money received by an individual or his or her spouse as salary, commission, fees, or any
other form of remuneration, whether in cash or in kind, from a business in which the
individual has a material interest must be counted as income.

Therefore, if one spouse receives compensation from a business in which the other spouse
has a large interest, the two incomes should be combined and taxed to the spouse with the
greater stake in the business.

Any additional income received by the spouse from a business in which the person has a
material stake is not covered by this provision and will not be pooled.

Where both husband and wife have a significant financial stake in the business and get
compensation from it:

If both the husband and wife have a material stake in the business and are receiving
compensation from it, then the compensation of both should be pooled in the hands of the
spouse whose overall income is larger before factoring in the compensation received from the
business.

Income received by the spouse as a result of property transfers (Section 64(1)(iv))

All income accruing to the spouse of an individual from assets (other than real property)
transferred directly or indirectly to the spouse of such an individual other than for adequate
consideration or in connection with an agreement to live apart shall be included in computing
such individual's total income, subject to the provisions of section 27(i) (i.e. deemed owner).

This rule states that a person's total income must include the income from any asset
transferred to his or her spouse, other than real property. For residential real estate, section 27
applies and the yearly worth of the property is taxed in the hands of the transferor as if the
transferor were the owner

Income from assets transferred to son's wife [Section 64(1)(vi)]:

An individual's income must include any money earned from assets transferred directly or
indirectly to his son's wife after 1.6.1973 without proper consideration. For instance, R gives
his son's wife 1,000 IDBI bonds with a 10% yield, each worth Rs.100, for free. IDBI has
declared interest of Rs.10,000. Although R's son's wife receives Rs10,000 in interest, this sum
is to be included as part of R's income under the heading "Income from Other Sources" for
determining R's total income.
 Income from assets transferred to any person for the benefit of the transferor's spouse
[Section 64(1)(vii)]: 19

If an individual transfers property to another person or an association of people without

adequate consideration, the transferor must include the income from those assets in his or her
taxable income to the extent that the income is for the immediate or deferred benefit of his or
her spouse. Income on such an asset to the extent of benefit which accrues to the spouse shall
be included in the total income of the individual where an asset has been transferred to
another person without adequate consideration for the benefit of the spouse of the individual
and for some other persons.

Case in point:

If X gives his friend Y his house with the stipulation that half of the rental income is to be
used for Mrs. X's benefit and the other half is to be used for the benefit of others, then X must
include the rental income to the extent of 50% in his total income.:

If a person transfers property after June 1st, 1973, without adequate consideration, and that
property is used to support the transferor's son and his wife, the transferor must count the
income from that property as income to him or her.

The Section 64(1A) clubbing of a minor child's income:

All money received by a parent on behalf of a minor kid is counted against that parent's total
income. As a result, a child's earnings should be combined with those of his or her parents.

One parent's total income (after deducting the other parent's) will be used to determine
custody. If his parents' marriage has broken down, his share of the household's income for the
preceding year will go to whichever parent was responsible for providing for him.

If one parent has income included in their total income, that income cannot be included in
their total income for the following year unless the Assessing Officer is convinced, after
hearing from the other parent, that it is necessary to do so.

Any parent whose total income includes their minor kid's income is entitled to an exemption
in the amount of Rs.1,500 per child whose income is included in the parent's total.

19
Clubbing of Income under Section 64
https://cleartax.in/s/section-64-clubbing-income
Section 64(2) income from self-acquired property that has been converted to joint
family property.

An individual's income from separate property that he has converted into the property of the
Hindu Undivided Family (HUF), thrown into the common stock of the HUF, or otherwise
transferred to the HUF without adequate consideration will still be counted as part of that
individual's total income.

In other words, if an individual's self-acquired property is treated/converted into joint family

property without adequate consideration, any income the family derives from the property is
considered to belong to the original owner of the self-acquired property.

For instance, X has a rental property that brings him a yearly profit of Rs 6,00,000. If, as a
member of a HUF, he decides to make this property part of the HUF's assets, then. Although
the HUF will now be receiving the revenue, it will still be considered X's personal income
and included as such for calculating his overall income (under the heading "Income from
House Property").