Section 64 of the Income Tax Act, 1961, mandates the clubbing of certain incomes earned by family members (spouse, minor child, etc.) with the income of the taxpayer to prevent tax avoidance through income splitting. 1. Income of Spouse [Section 64(1)(ii)] When is Spouse’s Income Clubbed? Income of a spouse is clubbed in the taxpayer’s hands if: […]
Basic Rule Under Section 64(1A), all income of a minor child (below 18 years) is automatically clubbed with the income of: The parent whose total income is higher(before clubbing) Exception:Income earned by the minor through their own skill/talent What Income Gets Clubbed? INCOME TYPE CLUBBING STATUS Interest from fixed deposits (gifted by parents/relatives) ✅ Clubbed Dividend from shares gifted
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Key Rule When an individual converts their self-acquired property into HUF (Joint Family) property, any income generated from that property continues to be taxable in the individual’s hands (not the HUF’s). How This Works Self-Acquired Property→ Property earned through personal income (not inherited) Conversion to HUF→ Transferring ownership to Hindu Undivided Family Tax Effect→ Despite transfer, income (rent,
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When income is clubbed under Sections 60-65 of the Income Tax Act, it is taxed under the same head as it would have been taxed in the hands of the original recipient. Here’s the detailed breakdown: 1. General Rule for Clubbed Income Clubbed income retains its original character It is classified under the same head of incomeas applicable to the transferee
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Section 65 clarifies the tax liability of the transferee (recipient of income/assets) when income is clubbed in the transferor’s hands under Sections 60-64. Key Rules Under Section 65 1. No Double Taxation If income is taxed in the transferor’s hands(due to clubbing), the transferee is not taxed again on the same income. Ensures no double taxationof the same income. 2. Transferee’s Reporting
1. Basic Principle of Assessment Clubbed income is assessed in the hands of the transferor (not the transferee) under the same head of income as it would have been taxed if received by the transferee. The transferor must include this income in their total income for tax computation. 2. Step-by-Step Assessment Process Identify Clubbing Provision Applicable Determine which section
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Under the Income Tax Act, 1961, certain transactions or scenarios are treated as “deemed profits” and taxed under “Profits and Gains of Business or Profession” (PGBP), even if they do not strictly qualify as business income. These provisions prevent tax evasion by bringing unexplained or artificially reduced income into the tax net. A. Unexplained Cash Credits (Section 68) Applicability:
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Section 68 is a critical anti-evasion provision that targets unexplained sums credited in a taxpayer’s books of accounts. It ensures financial transparency by requiring taxpayers to justify the source and nature of cash credits, failing which the amount is treated as taxable income. Key Features of Section 68 Applicability Applies to all taxpayers(individuals, firms, companies, HUFs)
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1. Key Features of Section 69 Objective: Targets unexplained investments(e.g., property, gold, shares) not recorded in books. Deemed Income: Treated as taxable incomein the year of investment. Burden of Proof: Assessee must explain the sourceand nature of investment. Tax Rate: 60% + 25% surcharge + 4% cess = 25%(under Section 115BBE). 2. Conditions for Invoking Section 69 Investment Exists(e.g., property, jewelry, shares).
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1. Key Features of Section 69A Objective: Targets unexplained money, jewellery, or assetsfound in possession but not recorded in books. Deemed Income: Treated as taxable incomein the financial year of discovery. Burden of Proof: Assessee must explain the sourceof the money/assets. Tax Rate: 60% + 25% surcharge + 4% cess = 25%(under Section 115BBE). 2. Conditions for Invoking Section 69A
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