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Aug,07,2025, 14:00 hrs
Clubbing provisions under income tax laws
Balwant Jain , Tax and Investment Expert
guest: Age 48, Monthly SIP ABSL India GenNext(10k- since 2013),SBI Focused(15k-2013),Axis Blue chip(25k-2020),Invesco Mid Cap(10k-2021),UTI Nifty 50 Index(10k-2021), PGIM Global Equity Opportunities (10k-2021),SBI Small Cap (5k-2020),Nippon small cap(10k-2023),NPS Tier I II(8k-2013) suggestion to equity portfolio rebalance for long term growth ? also need suggestion for fresh 8 lakhs investment ?
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guest: I am 32 years old, Married, Self Employed and Filling my ITR from the past 7-8 years. My income comes under higher tax slab as per current IT Laws. Now If my GrandFather ( Who is in the highest tax slab ) makes a gift of Rs 30 Lakhs from the sale proceed of Agricultural Land which is outside the Municipal Area, Then in that case if I invest that Amount in F.D with 8% Coupon Rate / Interest Rate than the Interest of Rs 240000/- from this F.D. Would be a Part of My income from other sources OR this would be Treated as Income of my Grandfather by way of Clubbing.
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If the aggregate of all the gifts received by an individual during a financial year exceeds Rs. 50,000/- the entire amount becomes fully taxable generally. However gift received from specified relatives is not treated as income. Grand father is covered under the definition of specified relative category. Since you are a major so the provisions of clubbing will also not get attracted and thus the interest received by you will be taxable in your hand.
guest: My divorce decree has been passed by the lower court but my wife has filed an appeal in the high court. Now me and my wife do not wish to go on the proceedings of court and therefore want to go for mutual consent for divorce in high court. I don`t have money to pay her alimony. So I have decided to give away a property standing in the name of my mother. I want to know if my mother can give her property to my wife for divorce settlement. What are the tax implications now and what will be the tax implications when my wife sells that property in future.
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Normally when a mother in law gifts anything without any consideration to the daughter in law, the income arising to such property is clubbed with the income of the mother in law. I understand the house property which stands in your mother’s name will be gifted by your mother to your wife in consideration of your wife agreeing to the terms of mutual divorce. So there is no question of there being no consideration for this transfer. However the clubbing provisions will apply as long as the relationship of mother in law and daughter in law subsists. So the question of clubbing does not arise any way once the divorce is finally decreed. So when your wife sells the property, she will be liable to pay capital gains tax on the profits so made and there is not tax liability on your mother whatsoever once the divorce becomes final.
guest: My wife had a residential property in her name at Delhi. She has now gifted this property (with nil consideration) to our Daughter-in-law and Son (50-50 share) . This property has been registered in their names after paying the necessary Stamp Duty on the basis of prevailing Circle Rate. How the rent received from the property will be taxed. Whether any clubbing provision will arise. In case the property is sold out after three years; how the long term Capital Gain will be calculated.
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Let us discuss the first part. The gift of the property made by your wife to your son and daughter in law is not to be treated as income as the mother in law and mother are covered under exemption of the definition of relative under Section 56(2).Your wife also does not have any tax liability at the time of gifting the house property. As far as taxation of rent is concerned, the son’s share of rent will be taxable in his hand but the rent receivable by your daughter in law has clubbing implications and the rent will be clubbed with the income of your wife accordingly. When the property is sold the capital gain attributable to your daughter in laws share will be taxable in the hands of your wife. Profits made by Your son`s share will be taxable in his hand.
guest: I have gifted Rs. 4 lakh to my wife who has deposited this money in a fixed deposit with a bank for 3 years. Please let me know about the chargeability of interest on such bank fixed deposits. My wife is a homemaker and does not have any other income. Would it have made any difference in case the money was gifted to my married daughter who is major?
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As per the present provision of income tax laws gift made received from a specified relative including your spouse is not to be treated as income without any monetary limit. However any income arising from gift so made to your spouse, shall be added to the income of the spouse making the gift. So interest earned by your wife on the fixed deposit shall be clubbed in your income and taxed in your hand. These provisions of clubbing of income would not apply in case the gift was made to your major daughter whether married or not. So had you given the gift to your married daughter, the interest earned on such bank deposit would have been taxable in her hand.
guest: My daughter aged 10 years works in TV serials. She earns around seventy five thousands yearly from acting in TV serials and for modelling. Is she liable to pay any income tax on it or will her income be included in my income. In addition to the above income she has interest income of Rs. 15,000/- from bank fixed deposits.
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As per the clubbing provisions of the law of Section 64(1A) of the Income Tax Act any income arising or accruing to a minor shall be clubbed and included in the income of the parent whose income is higher. However in case the income is earned by the child through manual work or by using his special talent and expertise the clubbing provisions will not apply. Therefore such income shall be taxable in the hands of the child if the taxable income exceeds the tax slab. Since the income earned by your daughter is below taxable limit, she does not have any tax liability on this account. However the interest on fixed deposit shall be clubbed with the income of the parent whose income is higher. Please note that once the income of such child is included in income of a particular parent it shall continued to be so included in the income of such parent even if the income of such parent becomes lower than the income of the other parent. So the interest income of Rs. 15,000/- shall be included in the income of the parent whose income is higher. Please note that there is an exemption upto Rs. 1500/- per child so the income of your daughter to be included in parent’s income shall be Rs. 13,500/-.
guest: I`m a senior citizen age 76 ,Govt pensioner. Pension and interest exceeds five lakh annual. As HUF Karta wants to transfer my Bank deposit in HUF . Please guide me regarding IT rules so my HUF income of this amount may not club in my Personal income.
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As per the clubbing provisions of the law of Section 64(1A) of the Income Tax Act any income arising or accruing to a minor shall be clubbed and included in the income of the parent whose income is higher. However in case the income is earned by the child through manual work or by using his special talent and expertise the clubbing provisions will not apply. Therefore such income shall be taxable in the hands of the child if the taxable income exceeds the tax slab. Since the income earned by your daughter is below taxable limit, she does not have any tax liability on this account. However the interest on fixed deposit shall be clubbed with the income of the parent whose income is higher. Please note that once the income of such child is included in income of a particular parent it shall continued to be so included in the income of such parent even if the income of such parent becomes lower than the income of the other parent. So the interest income of Rs. 15,000/- shall be included in the income of the parent whose income is higher. Please note that there is an exemption upto Rs. 1500/- per child so the income of your daughter to be included in parent’s income shall be Rs. 13,500/-.
guest: Please clarify whether a minor`s interest income, which he earns from Fixed deposit that has been deposited with bank in the name of minor(son) by Karta(father) from funds of HUF, can be included in income of HUF for assessment of Taxable income.
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As per the provisions of section 64 any income arising to a minor except which is earned through his personal skills and efforts have to be included in the income of the parent whose income is higher. Since there is a clear provision for clubbing of income of minor, the same has to be included in the income of the parents with higher income and thus can not be included in HUF’s income.
guest: I own a house in Mumbai in which I live. I understand that if I give it on rent, the rental income will be added to my income. Can I reduce my tax liability by gifting the property to my wife, and then renting out the house?
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According to section 64 of the Income Tax Act, 1961 (the Act), any transfer of an asset to spouse without adequate consideration attracts clubbing provisions and accordingly the income arising to the spouse out of the asset transferred is taxable in the hands of the spouse, who had transferred the asset. However, if your wife re-invests the rental income so received, in any other income bearing instrument and earns income, the second generation of income shall be taxable in her hands and shall not be clubbed with your income. Please note that you may be required to execute registered deed/gift deed to document the gift transaction and comply with the stamp duty requirements.
guest: I am a salaried individual. I have given some money to my wife as gift with which she has opened a recurring deposit (RD) account in her name. She is a homemaker and has no source of income. What is the tax treatment for interest on the RD?
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According to the clubbing provisions of the Indian tax law, any transfer of an asset to spouse, without adequate consideration, attracts clubbing provisions and accordingly the income arising to the spouse out of the asset transferred is taxable in the hands of the transferor spouse. In view of the same, the interest income, arising from investment made by your wife in the recurring deposit out of the gifted money, shall be taxable in your hands according to the aforesaid clubbing provisions of the Act. However, if your wife re-invests the interest income in any other income-bearing instrument and earns income from that, the second generation of income shall be taxable in her hands only and shall not be clubbed with your income. In this regard, please also note that according to Indian tax laws, if the money is received from a relative (which includes spouse of an individual) without any consideration, then such money is not taxable in the hands of the recipient. Accordingly, the money gifted by you to your wife shall not be taxable in her hands.
guest: My wife would like to invest some money in equity . if she made a profit of about 50k in a year (short term gain). whether we have to pay tax as she is a house wife. as per the new tax slab. there will be no tax up to 2 lakh
:
If your wife is not an earning member, then as per income tax regulation Clubbing of income rule comes into picture, thereby you would be required to club the gains so made out of investment in equities and the same will be assessed alongside your income, hence it would become taxable (you being the assessee). If the investment is out of the earnings of your spouse and the short term gains falls below the taxable limit, then there would be no tax to pay.
guest: If I make a gift to my wife and she purchases tax free bonds. What would happen to the income from these bonds? would the income be clubbed with my income and do i have to pay tax on the income?
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Since the bonds are tax free, there is no tax whether you invest in your name or your spouse`s name. There is also no gift tax implication on the amount that you have gifted to your wife. Since they are tax free bonds they will not be liable to tax. However, if she invests into any other taxable instrument; the interest derived from other taxable instruments will be brought under the purview of taxes. There is a provision for clubbing of income with spouse if such income is not attributable to her earning capacity, the same will be clubbed alongside your income and taxed at normal rates as if the income was received by you.
