·        

CASE I: When an Individual is assessable in respect of Remuneration of his ‘Spouse’ [Sec. 64(1)(ii)]

• If the above conditions are satisfied then Salary income of the spouse will be taxable in the hands of the taxpayer.

PLEASE NOTE:

• Salary referred here is the total income derived by an individual from Salaries, subject to adjustments being made as per the provisions of the Income tax Act.

• Substantial Interest’ is defined as a situation wherein a person is the beneficial owner of at least 20% or more Equity Voting Power (in case of Company) or is entitled to 20% or more of the profits. (in any other case).

•   Where Husband & Wife both have substantial interest in a concern & they are also in receipt of Salary from such concern then such salary will be clubbed in the income of either Husband or Wife who has higher income excluding remuneration.

ILLUSTRATIONS.. For Your better understanding

• Mr. A is the Managing Director of a company XYZ Pvt. Ltd. Mrs. A is working as Marketing Development head in XYZ Pvt. Ltd & is in receipt of remuneration of Rs. 10, 59,000/- p.a (calculated as per the provisions of the Income tax Act). Mrs. A however is only HSC passed and also does not have any prior working experience. In such case whole remuneration received by Mrs. A will be solely taxed in the hands of Mr. A.

Case II: When an Individual is assessed in respect of Income from assets transferred to Spouse [Sec. 64(1)(iv)]

• If the above conditions are satisfied then Income from such asset will be taxable in the hands of the TRANSFEROR

PLEASE NOTE:

• Spouse means to include Husband or Wife of the Taxpayer.

• Income from the asset is to be calculated after considering all relevant provisions of the Income Tax Act’ 1961.

• The asset definition specifically excludes House Property from it’s purview considering the fact that on satisfaction of the above mentioned conditions on a house property transfer the transferor would considered to be the ‘deemed owner’ of the property and income from same would be taxed in hands of transferor.

•   In case of transfer of House property by the transferee, Capital Gains will first be calculated in the hands of transferee, and then clubbed into the taxable income of the Transferor of such House property.

• The word Adequate Consideration here means any Monetary Consideration. Natural love & affection may be an adequate consideration from the transferor’s view point but such instance would still be considered as a transfer without Adequate Consideration.

ILLUSTRATIONS.. For Your better understanding

• Mr. X transferred an asset worth Rs. 10, 00,000/- to his spouse for Rs.7, 50,000/-in which case Rs. 2, 50,000 would be the inadequate consideration. Hence income from such asset of Rs 25,000/- would be taxable in the hands of Mr. X to the extent of inadequacy of consideration received, i.e., Rs. 6,250/- [25,000 × (10,00,000 - 7,50,000) ÷ 10,00,000/-]

 Case III: When Individual is assessable in respect of income from assets transferred to Son’s Wife [Sec. 64(1)(vi)]  

• If above conditions are satisfied then income from the asset is included in the income of the TRANSFEROR.

ILLUSTRATIONS.. For Your better understanding

• Mr. X transferred an asset worth Rs. 15, 00,000/- to his Elder sons’ wife without any consideration, income earned from such asset will be taxable in the hands of Mr. X.

Case IV: When Individual is assessable in respect of income from assets transferred to a Person for the benefit of Spouse [Sec. 64(1)(vii)]  

• If above conditions are satisfied then income from the asset is included in the income of the TRANSFEROR.

ILLUSTRATIONS.. For Your better understanding

• Mr. Z transferred Govt. Bonds worth Rs. 27, 00,000/- to an Association of Persons without any consideration with a view to utilize Interest income for benefit of Mrs. Z in future, hence Interest income earned from such bonds will be taxable in the hands of Mr. Z.

Case V: When Individual is assessable in respect of income from assets transferred to a Person for the benefit of Sons’ Wife [Sec. 64(1)(viii)]

• If above conditions are satisfied then income from the asset is included in the income of the TRANSFEROR. 

ILLUSTRATIONS.. For Your better understanding  

•   Mr. Ugly transferred Debentures worth Rs. 21, 00,000/- to an Association of Persons without any consideration with a view to utilize Interest income for benefit of Mrs. C (wife of his Younger Son) in future, hence Interest income earned from such Debentures will be taxable in the hands of Mr. Ugly. 

Case VI: When Individual is assessable in respect of income of his Minor Child [Sec. 64(1A)]  

•  Taxability: In case an Income is earned by a child before his attainment of 18 years of age, then such income of child will be included in the income of the parent whose taxable income, excluding income includible u/s 64(1A), is GREATER .

•   Exemption u/s 10(32): In case of inclusion of income earned by a minor in the parent’s income, exemption of Rs. 1,500/- per Child per Annum or Income earned by child whichever is lower.

•  Non Taxability of Income in certain cases: 

1. Income of a Minor Child suffering from any disability specified u/s 80U .

2. Income of a Minor Child on account of any Manual work.

3. Income of a Minor Child on account of any activity involving his Skill, Talent or Specialized knowledge & Experience.

PLEASE NOTE:  

•  Child herein includes both Step child as well as Adopted child.

•  If both the Parents of the minor child are not alive and such minor is maintained by a guardian, then guardian of the minor child should file a return of income on behalf of the minor. In no case will the income be clubbed in the hands of the Guardian.

• Where child attains majority during the previous year part of the income earned by the child during his minor stage shall be clubbed in the hands of the Parent. 

ILLUSTRATIONS.. For Your better understanding  

• X a minor earned Rs. 1, 50,000/- from business income in PY 09-10. His Father’s tax able income is Rs. 10, 00,000/- while that of his mother is Rs. 3, 50,000/-. In this case income of Rs. 1, 50,000 of X will be taxable in the hands of his father.