A person is normally taxed in respect of income earned by him only. However, in certain special cases, the 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 the income of other person too. The situation in which the income of other person is included in the income of the taxpayer is called ‘clubbing of income’.
For instance, the income of a minor child is clubbed with the income of his/her parent. Similarly, income from investments made by you in the name of your spouse will be clubbed with your income and taxed accordingly.
Section 60 to 64 of the Income Tax Act, 1961, contain various provisions relating to clubbing of income. Clubbing of income is done to ensure taxpayers do not avoid paying their tax liabilities through the moving of incomes of assets within the family. All investments including property, fixed deposits, shares, mutual funds, post office savings etc. are covered as clubbed income.
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As per Section 64 of the Income-Tax Act, 2025 (ITA), where an individual has a substantial interest in a concern, any income from that concern by way of salary, commission, fees, or any other form of remuneration paid to the spouse of the said individual is included in the total income of such individual.
However, the clubbing provisions do not apply if the spouse possesses ‘technical or professional qualifications’, and the income is solely attributable to the application of his or her technical or professional knowledge and experience. These two conditions are cumulative and not alternative.
“The Income-Tax Bill 2025 (ITB) proposes to remove the first condition and include the term “qualification” in the second condition alongside knowledge and experience. Thus, income could be attributable to the application of technical or professional knowledge, experience, and qualifications. However, the ITB does not explicitly say that the spouse must possess such qualifications. It will cover cases where a spouse applies technical or professional knowledge and experience without formal qualifications,” according to Taxmann’s Advisory & Research.
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