Clubbing Income and Gains

Introduction

In this article I will be writing about the clubbing of Income. There is the possibility that people will distribute their income to other family members for reducing the tax burden. For the reason clubbing of income from some of close relationships like minor child,wife,etc. This article explains it in detail about the clubbing of income and how to utilize it for the tax savings. If you have any doubts please post it in the comments section. Subscribe to our future articles here.

Clubbing of Income

• While computing the total income of one person, if he transferred any assets directly or indirectly to other person, the income from that property will be included in his income. For example, If Mr.A transferring his house to wife as a gift. The rental income from that house will be included in Mr.A’s income
• Income can not be clubbed if the transfer is for some consideration like live apart or there is no husband and wife relationship. Also the transfer of asset to son’s wife without consideration will be clubbed into Mr. A’s income.
• For example, Mr.A deposit Rs.1000000 in the name of his son’s wife saying that it will be used for her benefits. The interest income from that deposit will be clubbed to Mr. A’s income. Note that any income arises from investing the interest income will not be included to Mr. A since compound income is not possible.
• The income of a minor child is to be clubbed with either of his parents, depending on whose total income (excluding the child’s income) is greater. If the parents’ marriage breaks down, the child’s income shall be clubbed with the parent who maintained the minor child in the previous year. Such parent shall be entitled to an exemption to the extent of such income or Rs 1,500 per child, whichever is less.
• If any investment is made in the name of the minor child, the income from that investment will be clubbed to parents income.
• Income of a minor child shall not be clubbed and is taxable if the child is suffering from a disability (under Section 80U) such as physical disability, complete blindness

Summary

The above article explained few of the important points related to the clubbing of income. If you understand the clubbing one’s income it will help you to save the tax effectively. I hope this article was useful and informative. If you have any doubts please post it in the comments section. I will answer all your questions. Thank you for reading this article.

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Related posts:

1. Income from Minor Child
2. Factors needs to consider for computing taxable income
3. Income From House Property
4. Income Tax for Agricultural Income
5. Income Tax Exemption and Rules on Gifts as Income of Source