Aggregation of income

INCOME TAX- Aggregation of Income/ Clubbing of the income under INCOME TAX ACT,1961
Income of other persons to be included in the income of individual( Section 60-65)
Income received from Firm assessed as Firm And Association of Persons (Section 66-67)
Deemed Income (Section 68-69)
Transfer of Income without Transfer of Assets[Sec. 60]
Revocable Transfer of Assets� [Sec. 61]

1. AGGREGATION OF INCOME

2. Clubbing of Income Introduction Generally person is liable to pay tax only on the income which is earned by him. However under Income Tax Act 1961 there are certain provisions as per which an income of though legally belonging to one person is to be included in the total income of other person. Inclusion of others income in the income of assessee is called “Clubbing of income” and such clubbed income is termed as “Deemed Income”.

3. Cases where clubbing of income applies Income of o ther persons to be included in the income of individual( Section 60-65) Income received from Firm assessed as Firm And Association of Persons (Section 66-67) Deemed Income (Section 68-69)

4. Income of other persons to be included in assessee’s total income (Sec. 60-65)

5. Transfer of Income without Transfer of Assets[Sec. 60] If assessee transfers to another person some income but without the transfer of assets producing that income. The income from the asset would be taxable in the hands of the transferor. ( the person who transfer the asset ). The transfer may be revocable or may not be revocable. The transfer may be effected at any time.

6. Revocable Transfer of Assets [Sec. 61] By virtue of Section 61, if an asset is transferred under a “revocable transfer”, income from such asset is taxable in the hands of the transferor and shall be included in his total income.

7. Section-63 defines “transfer” & “revocable transfer” A transfer shall be deemed to be revocable if It contains any provision for the re-transfer directly or indirectly of the whole or any part of the income or assets to the transferor. It, in any way, gives the transferor a right to reassume power directly of the whole or indirectly over the whole or any part of the income or assets. b) ”Transfer” includes any settlement, trust, covenant, agreement or arrangement.

8. Provisions of Section-62(1) Provisions of Section-61 shall not be applicable in following revocable transfers . If a) the transfer is by way of trust which is not revocable during the life time of the beneficiary. Or b) transfer is otherwise than by way of trust and is not revocable during the life time of the transferee Or c) transfer is made before the 1 st day of April 1961, which is not revocable for a period exceeding six years. And d) the transferor does not derive any benefit from such income .

9. An Individual is assessable in respect of remuneration of spouse [Sec.64(1)(ii)] If an individual has got a substantial interest in any company or concern, then any income accruing to the spouse of such individual from that concern/company shall be included in the total income of the individual having substantial interest in such concern. The income to the spouse may be by way of salary, bonus, commission fee or any other remuneration.

10. Meaning of Substantial Interest In case of a company A person having atleast 20% of equity shares carrying voting right. In other cases A person entitled to atleast 20% of the profit of the concern. Exception to above clubbing If income derived by the employed spouse from such concern is due to his/her knowledge, technical qualification, work experience etc. It shall not be clubbed with the income of the spouse holding substantial income. (Taxable in the hands of employed spouse)

11. If both spouses hold substantial interest in the same concern In this case, such income of a spouse shall be clubbed with the income of the spouse having higher income. Meaning of Spouse . The word spouse means husband or wife, i.e. husband is spouse for wife and wife is spouse for husband. Wife/ husband means lawfully wedded wife/husband .

12. INDIVIDUAL ASSESSABLE IN RESPECT OF INCOME FROM ASSETS TRANSFERRED TO SPOUSE. [Sec. 64(1)(iv)] If any individual transfers any asset (other than house property) to his/her spouse without adequate consideration. Assets transferred means when an individual purchases property in the name of his wife from his own funds. The relationship of husband and wife should subsist both at the time of transfer and at the time of accrual of income. Any income from such transferred assets will be included in the income of the transferor .

13. EXCEPTION FOR SEC-64(1)(IV) If the assets are transferred before marriage. If the assets are transferred for adequate consideration. If the assets are transferred in connection with an agreement to live apart. If on the date of accrual of income, transferee is not spouse of the transferor. If a property is transferred by a Karta of HUF, gifting coparceners property to his wife. If property is acquired by the spouse out of pocket money (i.e. an allowance given to the wife by her husband for her dress and usual household expenses)

14. TRANSFER OF CAPITAL ASSET TO SON’S WIFE U/S 64 (1) (vi) Any income accruing from asset which is transferred after 1-6-1973 to daughter-in-law without adequate consideration shall be considered to be the income of transferor.

15. TRANSFER OF ASSET FOR THE BENEFIT OF SPOUSE [SEC-64(1) OR FOR THE BENEFIT OF SON’S WIFE[SEC-64(1)(VIII) if an individual transfer any capital assets directly or indirectly otherwise than for adequate consideration to his/her daughter in law after 31.05.1973 for her immediate or deferred benefit, then the income derived by daughter-in-law from said capital assets will be include in the income of the transferor.

16. INVESTMENT OF ASSETS TRANSFERRED WITHOUT ADQUATE CONSIDERATION IN BUSINESS [SECTION 64(1) EXPLANATION 3] In case assets transferred directly or indirectly by an individual to his spouse or son’s wife (to be referred as transferee) are invested by transferee : Investment in business must not in the form of capital as a partner in the firm ;

17. In case investment is made as contribution of capital as a partner in firm The interest receivable by the transferee from the firm calculated in proportion given below shall be clubbed with the income of individual :

18. INCOME OF MINOR [SECTION 64(1A)] The word child here means natural child, adopted child, step child. Income derived by the minor child will be clubbed in the income of the parent whose income is higher or parent who maintains such minor child. EXCEPTION Manual work done by minor child Activity involving application of his/her specialized knowledge and experience.

19. EXEMPTION U/s 10(32) parent can claim an exemption of income of minor child so clubbed or RS. 1500 w.e is less. Income of the minor child who is suffering from any of the disabilities specified u/s 80U shall not be clubbed.

20. TRANSFER OF INDIVIDUAL’S SELF ACQUIRED PROPERTY TO THE H.U.F OF WHICH HE IS A MEMBER [SEC - 64(2)] U/s 64(2)where an individual converts his individual or self-acquired property into the common pool of H.U.F of which he is a member after31-12-1969, the income from such a converted property shall be treated as under : (a) The individual shall be deemed to have transferred the converted property, through the family, to the members of the family for being held by them jointly. (b) The income derived from the converted property or any part thereof shall be deemed to arise to the individual and not to the family.

21. BENAMI TRANSACTIONS If a transaction is considered to be a Benami transaction, the income from such transaction shall be taxable in the hands of the real person and so the benamider is not taxed for the income arising from such transactions.

22. INCOME RECEIVED FROM FIRM ASSESSED AS FIRM AND ASSOCIATION OF PERSONS

23. INCOME RECEIVED FROM AOP [SEC-67A] If the assessee is a member of an Association of Persons or a body of individuals other than Hindu Undivided Family, any portion of the amount which he is entitled to get is clubbed in the total income of the assessee for the calculation of aggregation of total income of the assessee. This income is tax-free as income tax is already paid by the association of persons or body.

24. If the assessee is fails to submit any satisfactory explanation or the A.O is not satisfied with the explanation, the income is treated as assessee’s income for any sum which is found in the books maintained for any previous year. DEEMED INCOMES

25. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee does not give any explanation about the nature and source of the sum so credited will be charged to income tax as the income of the assessee for that previous year. UNEXPLAINED CASH CREDIT [SEC.68]

26. UNEXPLAINED INVESTMENTS [SEC.69] Where in the financial year immediately preceding the assessment year, the assessee has made investments which are not recorded in the books of account maintained by him. The assessee offers no explanation about the nature and source of the investments. The value of the investments may be deemed to be the income of the assessee of such financial year.

27. UNEXPLAINED MONEY [SEC.69A] Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery, or other valuable article which are not recorded in the books of account maintained by him. The assessee offers no explanation about the nature and source of acquisition then value of such things may be deemed to the income of the assessee for such financial year.

28. INVESTMENTS NOT FULLY DISCLOSED [SEC.69B] Where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable article. The A.O. finds that the amount expended on making such investments or in acquiring such things exceeds the amount recorded in the books of account maintained by the assessee, and he offers no explanation about such excess amount. The excess amount may be deemed to be the income of the assessee, for such financial year.

29. UNEXPLAINED EXPENDITURE [SEC. 69C] Where in any financial year an assessee has incurred any expenditure & he offers no explanation about the source of such expenditure. The amount covered by such expenditure, may deemed to be the income of the assessee for such financial year.

30. PAYMENT OF HUNDI MONEY IN CASH [SEC. 69D] Where any amount is borrowed on a hundi, or any amount due thereon is repaid otherwise than through an account payee cheque, the amount so borrowed or repaid shall be deemed to be the income of the person borrowing or repaying for the previous year in which the amount was borrowed or repaid. Amount repaid shall include the amount of interest also.

31. THANK ALL OF YOU