Income Tax
Clubbing of Income of Other Persons

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
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

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CA Maninder Singh

CA Maninder Singh is a Chartered Accountant for the past 14 years. He also provides Accounts Tax GST Training in Delhi, Kerala and online.