Example of Tax Planning


Suppose a person has business income of 350000

Tax Applicable on it is 6180 as shown below

Particulars Amount
Income 350000
Tax  8000
Rebate 2000
Net Tax 6000
Cess 180
Total Tax 6180


He does tax planning and shows salary of his wife working in his office at Rs 120000

Hence his net business income =350000-120000=230000



Income of wife-120000 which is also tax free


Mr A     Mrs A  
Particulars Amount   Particulars Amount
Income 230000   Income 1200000
Tax  0   Tax  0
Rebate 0   Rebate 0
Net Tax 0   Net Tax 0
Cess 0   Cess 0
Total Tax 0   Total Tax 0


Tax Saved=6180

To prevent such tax planning,this section has been introduced

  and now income of spouse will be clubbed with income of person as shown below

Particulars Amount
Income of Mr A 230000
Income of Mrs B Clubbed 120000
Total Income 350000
Tax  8000
Rebate 2000
Net Tax 6000
Cess 180
Total Tax 6180


As per Section 64(!)

If a person has substantial interest in a concern and spouse receives salary/ remuneration from it, then salary/remuneration of spouse will be clubbed in hands of person having substantial interest.


No clubbing done if

the spouse has required technical professional qualification


Income solely attributed to such technical professional qualification 


Salary/Remuneration received from Spouse’s concern - Different types of Clubbing


What is Substantial Interest

It means

In Case of Meaning of Substantial Interest


(Private Limited/Limited Company)

Person Holds

20% or more voting power

Other than Company


Person entitled for

20% or more profit share


  1. Beneficial Ownership is Important [Not Actual Ownership]

          i.e. person in whose name shares are registered

  1. Share of wife & relatives also included while calculating 20% limit
  1. Relative means Wife / Brother/ Sister / linear ascendant( parents)/ Linear Descendants (Children )
  • (Brother in Law / Sister in Law Not Covered)



During the previous year 2015-16, the following transactions occurred in respect of Mr. A.

Mr. A holds 75% share in a partnership firm. Mrs. A received a commission of Rs 25,000 from the firm for promoting the sales of the firm. Mrs. A possesses no technical or professional qualification

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CA Maninder Singh

CA Maninder Singh is a Chartered Accountant for the past 13 years. He also provides Accounts Tax GST Training in Delhi, Kerala and online.