web analytics

Clubbing means

Income of one person included in the income of other person

 

Why It is done?

Sometimes people divert their income to some other person

Hence they are able to reduce their tax liability

In such cases, Governemnt has introduced clubbing provisons so that such tax avoidance would not be possible

 

 

Example of Tax Planning

Mr A  has income of Rs 300000 on which tax is payable as follows

Particulars Amount
Income 300000
Tax  5000
Rebate 2000
Net Tax 3000
Cess 90
Total Tax 3090

 

Tax Plannning 

 To avoid tax,he diverts his income

 and  claim that his income is only 200000 and balance 100000 is his wfe's income

Mr A     Mrs A  
Particulars Amount   Particulars Amount
Income 200000   Income 100000
Tax  0   Tax  0
Rebate 0   Rebate 0
Net Tax 0   Net Tax 0
Cess 0   Cess 0
Total Tax 0   Total Tax 0

 In this case,both he and his wife escape tax liability as both have income less than income tax slab rate oif 2500000

 

Tax Computation After Clubbing

Hence,clubbing provisons has been introduced by Government to stop this tax planning

Hence,Income of wife of Rs 100000 will be clubbed with Mr A

Mr A' s total income=300000 and tax will be charged on it

Particulars Amount
Income of Mr A 200000
Add  
Income of Mrs A Clubbed 100000
Total Income 300000
Tax  5000
Rebate 2000
Net Tax 3000
Cess 90
Total Tax 3090

 

Hence,clubbing helps in avoiding tax planning

 Lets study different types of clubbing in detail one by one

  1. Income Tax
  2. Clubbing of Income of Other Persons
Ask Download

About the Author

CA Maninder Singh's photo - Expert in Practical Accounts, Taxation and Efiling
CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 8 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com .
Jail