As per Section 61(1)

If a person transfers any asset (except house property)

to spouse for inadequate consideration

Otherwise than in an agreement to live apart,

then income of asset will be clubbed in hands of transferor

 

However if house property transferred, then Section 27(1) applicable (Of Income from House property) and not clubbing provisions 

 

Sale of Assets

If the spouse sell the asset and purchase any other asset and earns some income on such asset then also income will be clubbed

 

 

Asset Transferred Used for Business by Transferee

Proportionate Income arising from business will be treated as total income of transferor

Proportionate Investment=Value of Asset Transferred/Total Investment 

as on first day of previous year

 

 


EXAM QUESTION 1

Mr. Vaibhav started a proprietary business on 01.04.2014 with a capital of Rs 5,00,000. He incurred a loss of Rs 2,00,000 during the year 2014-15. To overcome the financial position, his wife Mrs. Vaishaly, a software Engineer, gave a gift of Rs 5,00,000 on 01.04.2015, which was immediately invested in the business by Mr. Vaibhav. He earned a profit of Rs 4,00,000 during the year 2015-16. Compute the amount to be clubbed in the hands of Mrs. Vaishaly for the Assessment Year 2016-17. If Mrs. Vaishaly gave the said amount as loan, what would be the amount to be clubbed?

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EXAM QUESTION 2

A proprietary business was started by Smt. Rani in the year 2013. As on 1.4.2014 her capital in business was Rs 3,00,000. Her husband gifted Rs 2,00,000 on 10.4.2014, which amount Smt. Rani invested in her business on the same date. Smt. Rani earned profits from her proprietory business for the Financial year 2014-2015, Rs 1,50,000 and Financial year 2015-16 Rs 3,90,000. Compute the income, to be clubbed in the hands of Rani‟s husband for the Assessment year 2016-17 with reasons.

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Note

CASES WHERE NO CLUBBING DONE

  • If assets given for adequate consideration,no clubbing
  • The relationship of husband and wife should exist both at the time of transfer of property and at the time of earning of income (Gift to fiancee-No clubbing
  • If person purchased an assets from out  of Pocket Money given by spouse then no clubbing shall be done.

 

 

  1. Income Tax
  2. Clubbing of Income of Other Persons
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Davneet Singh
Davneet Singh is a graduate from Indian Institute of Technology, Kanpur. He has been teaching from the past 8 years. He provides courses for Maths and Science at Teachoo. You can check his NCERT Solutions from Class 6 to 12.
  • Gaurav Tibrewal's image
    Gaurav Tibrewal
    Jan. 8, 2018, 3:34 p.m.
    A proprietary business was started by Smt. Rani in the year 2013. As on 1.4.2014 her capital in business was Rs 3,00,000. Her husband gifted Rs 2,00,000 on 10.4.2014, which amount Smt. Rani invested in her business on the same date. Smt. Rani earned profits from her proprietory business for the Financial year 2014-2015, Rs 1,50,000 and Financial year 2015-16 Rs 3,90,000. Compute the income, to be clubbed in the hands of Rani‟s husband for the Assessment year 2016-17 with reasons
    View answer