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
- Added to the transferor’s total incomeunder that head
2. Head-wise Classification of Clubbed Income
| TYPE OF CLUBBED INCOME | HEAD OF INCOME | EXAMPLES |
| Income from House Property | Income from House Property | Rent from property gifted to spouse/minor child |
| Capital Gains | Capital Gains | Profit from sale of shares transferred to son’s wife |
| Income from Other Sources | Other Sources | Interest from FDs gifted to minor child |
| Business Income | Profits & Gains of Business | Business profits where spouse is nominal partner without active involvement |
| Salary Income | Income from Salaries | Salary paid to spouse in controlled business (rare) |
3. Special Cases
A. Minor’s Self-Earned Income
- If minor earns through skills/talent(child artist, athlete):
- Not clubbed → Taxed under respective head (Profession/Business) in minor’s own return
- Can claim ₹1,500 exemption(Section 10(32))
B. HUF Conversions [Section 64(2)]
- Rental income from self-acquired→HUF property:
- Taxed as House Propertyin individual’s hands
- Not eligible for HUF deductions
4. Tax Return Filing
- Clubbed income is shown separatelyin the transferor’s ITR:
- ITR-2/ITR-3: Under respective schedules with “Clubbed Income” remark
- Schedule OS(Other Sources) for most clubbed incomes
- Schedule HPfor clubbed house property income
5. Deductions & Exemptions
- Allowed:Deductions applicable to the income head (e.g., Standard Deduction on clubbed house property rent)
- Not Allowed:Deductions specific to the transferee (e.g., minor’s education expenses)
Example:
- If clubbed FD interest (Other Sources):
- Eligible for Section 80TTA deduction(up to ₹10,000) in transferor’s hands
Key Points :
- Income head remains unchangedafter clubbing
- Tax rates apply as per the head(e.g., LTCG rates for clubbed capital gains)
- Transferor must reportclubbed income in their ITR under correct head
- Self-earned income of minorsescapes clubbing
