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 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

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