FAQs on Clubbing – As per IT Act, 1961

As per the present tax laws of India, you will be chargeable to tax for your income not for the income of any other person. However, certain wealthy individuals in order to lower their tax liability, sift a portion of their income or asset to another person who is in lower tax braket, so that overall tax liability will be lower.

We have written many articles on clubbing of income, in this article we have discussed certain common frequently assked questions on clubbing.l

Is there any deduction available for clubbing of my wife’s income in my hand?

No, clubbing provision does not provide any kind of deduction or exemption for getting it clubbed in your hand.

My wife has a LLB degree and before my marriage she was working as a legal advisor to a company. After my marriage she joined my company as a legal advisor. I have 80% holding in my company. Will her salary be included into my taxable income for the purpose of my tax calculation?

No, your wife’s salary will not be included with your salary as your wife has professional knowledge and experience in the field where she is working right now.

Your wife’s salary will be taxable in her hand and she is liable for her tax.

But as an employer, your company needs to deduct tax from her salary every month if it exceeds the basic exemption limit (for the financial year ending 31st march 2021 the basic exemption limit is Rs. 2, 50, 000)  

I have three minor children and two of them are generating interest from the fixed deposit we kept in their name. Will this interest amount be taxable in my hand?

As per section 64 of IT Act, any interest amount generated by a minor will get clubbed in the hands of parents whose income before clubbing is higher. Clubbing provision will not be attracted if your minor child has generated it due to his talent, skills or special

I have transferred the income portion generated out of my owned house to my girl friend for her living. Earlier I use to pay tax on this but now as I have transferred this portion to my girl friend, please let me know if I am still liable to tax for this.

As per the clubbing provision of IT act, if any income generated out of an asset has been transferred to a person without transferring the asset then it will be taxable in the hands of the transferor (the person who transfer such asset).

In your case you did not transfer the house but transferred the income that is generated out of your owned house hence clubbing provision will be attracted and it will get added to your hand.

is a fellow member of the Institute of Chartered Accountants of India. He lives in Bhubaneswar, India. He writes about personal finance, income tax, goods and services tax (GST), company law and other topics on finance. Follow him on facebook or instagram or twitter.