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Income of Other Persons included in our Income

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Income of Other Persons included in our Income. Clubbing of India In India, There are certain cases when the income of other persons has to be included in our income & we need to pay tax on the same We all must be wondering how is this possible? Why is this done? Well, The Income Tax Act says so!. In this article you can find complete details for Clubbing of Income Like -Income from Revocable Transfer of Assets, Income from Assets Transferred to Spouse, Income from Assets transferred to son’s wife, Clubbing of income of a minor child. Now you can scroll down below and check complete details for Income of Other Persons included in our Income. 

Income of Other Persons included in our Income

Income of Other Persons included in our Income

There are certain cases when the income of other persons has to be included in our income & we need to pay tax on the same. Let us have a look on such cases:

Transfer of Income when the asset is not transferred:

When the actual asset is not being transferred & only the income derived from such an asset will be transferred, such an income will be included in the total income of the person who is transferring such an income.

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Income from Revocable Transfer of Assets:

When the transfer deed contains any clause as regards the re-transfer of asset back to the transferor, it is called a revocable transfer. In such a case, all the incomes derived from the asset will be included in the income of the transferor.

Remuneration received from a concern where the other spouse has a substantial interest:

In such a case, if the remuneration is not due to the professional qualifications of the spouse, then the entire remuneration will be clubbed with the income of the former spouse who has a substantial interest in the concern.

Income from Assets Transferred to Spouse:

If an asset is transferred to the spouse, it will be included in the Total Income of the transferor. However, if the transfer is either for an adequate consideration or in connection with an agreement to live apart, then the income will not be clubbed.

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Income from Assets transferred to son’s wife:

If an asset is transferred to son’s wife for inadequate consideration, then the income derived from such an asset, shall be clubbed with the Total Income of the transferor.

Income from Assets transferred to any person for the benefit of spouse/ son’s wife:

In such a case also, if the transfer is otherwise than for an adequate consideration, the entire income of such an asset shall be clubbed with the income of the transferor.

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Clubbing of income of a minor child:

If a minor child has earned any income, the same has to be clubbed with the income of that parent whose total income (prior to the clubbing of minor’s income) is greater. However if the parents are separated, the parent who maintains the child will be required to club the minor’s income with his/ her income. A deduction of Rs. 1500/- to the extent of actual income of minor shall also be allowed. However, if the income earned by the minor is due to a) any manual work done by him or her; b) by application of any skills or talent or specialized knowledge or c) the minor is suffering from disability specified in the Act, in such cases, the income of the minor derived from the said sources, shall not be clubbed.

Now, the question which must be coming to your mind’s is, how will such an income be clubbed? Well, the clubbing would be done under the Relevant Head. For ex., if the income to be clubbed is HP income, the same will be clubbed under the Head – ‘Income from House Property’.

So, whenever you are undertaking such a transfer, make sure you comply with the clubbing provisions.

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About CA Ridhi Dhoot

The writer is a Chartered Accountant & a Licentiate Company Secretary. You can reach out to her at [email protected]

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