: Normally, a person is taxed in respect of income earned by him only. However, in certain
special cases income of other person is included (i.e., clubbed) in the taxable income of
the taxpayer and in such a case he will be liable to pay tax in respect of his income (if
any) as well as income of other person too. The situation in which income of other person is
included in the income of the taxpayer is called as clubbing of income.

If a person transfers only the income from an asset owned by him without transferring the
asset from which the income is generated, then the income from such an asset is taxed in the
hands of the transferor (i.e., person transferring the income).

Revocable transfer is generally a transfer in which the transferor directly or indirectly
exercises control/right over the asset transferred or over the income from the asset.
If a transfer is held to be a revocable, then income from the asset covered under revocable
transfer is taxed in the hands of the transferor

Under certain circumstances, remuneration (i.e., salary) received by the spouse of an
individual from a concern in which the individual is having substantial interest is clubbed
with the income of the individual.

An individual shall be deemed to have substantial interest in any concern, if such individual
alone or along with his relatives* beneficially holds at any time during the previous year
20% or more of the equity shares (in case of a company) or is entitled to 20% of profit (in
case of a concern other than a company).
*Relative for this purpose includes husband, wife, brother or sister or lineal ascendant or
descendent of that individual [Section 2(41)]

Remuneration is clubbed under the following circumstances:
• The individual is having substantial interest in a concern.
• Spouse of the individual is employed in the concern in which the individual is having
substantial interest.
• The spouse of the individual is employed without any technical or professional knowledge
or experience (i.e., remuneration is not justifiable).

If an individual transfers (directly or indirectly) his/her asset (other than house property)
to his or her spouse otherwise than for adequate consideration, then income from such asset
will be clubbed with the income of the individual (i.e., transferor). The clubbing
provisionswill apply even if the form of asset is changed by the transferee-spouse.

Clubbing provision will apply even in case of transfer of house property for inadequate
consideration. The difference being that it is dealt with another section of Income tax Act.

The clubbing provisions are not applicable in the following situations
• If the transfer of asset is for adequate consideration;
•
•If the transfer of asset is in connection with an agreement to live apart;
• If asset is transferred before marriage, no income will be clubbed even after marriage,
since the relation of husband and wife should exist both at the time of transfer of asset
and at the time of accrual of income;
• If on the date of accrual of income, transferee is not spouse of the transferor
(i.e., the relation of husband and wife does not exist).

If an individual transfer (directly or indirectly) his/her asset to his/ her son's wife
otherwise than for adequate consideration, then income from such asset will be clubbed with
the income of the individual (i.e., transferor being father-in-law/mother-in-law). The
provisions of clubbing will apply even if the form of asset is changed by the
transferee-daughter-in-law.
If the asset is transferred before marriage of son, no income will be clubbed even after
marriage, since the relation of father-in-law/mother-in-law and daughter-in-law should exist
both at the time of transfer of asset and at the time of accrual of income.
If on the date of accrual of income, the relation of father-in-law/mother-in-law and
daughter-in-law does not exist, then the provisions of clubbing will not apply.

If an individual transfers (directly or indirectly) his/her asset otherwise than for adequate
consideration to a person or an association of persons for the immediate or deferred benefit
of his/her spouse, then income arising from the asset so transferred will be clubbed with
the income of transferor.

: Income of minor child is clubbed with the income of his/her parent (*). Income of minor
child earned on account of manual work or any activity involving application of his/her
skill, knowledge, talent, experience, etc. will not be clubbed with the income of his/her
parent. However, accretion from such income will be clubbed with the income of parent of
such minor.
Income of minor will be clubbed with the income of that parent whose income (excluding
minor's income) is higher.
If the marriage of parents does not sustain, then minor's income will be clubbed with the
income of parent who maintains the minor.
In case the income of individual includes income of his/her minor child, such individual can
claim an exemption under Section 10(32) of Rs. 1,500 or income of minor so clubbed,
whichever is less.
(*) Income of a minor suffering from disability specified under Section 80U will not be
clubbed with the income of his/her parent.

When an individual, being a member of HUF, transfers his property to the HUF otherwise than
for adequate consideration or converts his property into the property belonging to the HUF
(it is done by impressing such property with the character of joint family property or
throwing such property into the common stock of the family), then clubbing provisions will
apply as follows:
• Before partition of the HUF, entire income from such property will be clubbed with the
income of transferor.
• After partition of the HUF, such property is distributed amongst the members of the
family. In such a case income derived from such property by the spouse of the transferor
will be clubbed with the income of the individual and will be charged to tax in his
hands.