Clubbing of Income — FAQs

Stop Tax Avoidance: Practical FAQs on Clubbing of Income (Sections 60–64)

The principle of clubbing of income prevents taxpayers from avoiding tax by transferring income or assets to others (especially relatives or minors) while retaining control or benefit.
These FAQs explain what clubbing of income means, its applicable sections, common situations, and how to report such income correctly in your return.

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Frequently Asked Questions— Clubbing of Income

Clubbing of income means including another person’s income in your taxable income when the law treats you as the real owner or beneficiary of that income. It is governed by Sections 60 to 64 of the Act.

It ensures that income is taxed in the hands of the person who actually earns or controls it, preventing tax evasion through artificial transfers to relatives or others with lower tax rates.

  • Section 60: Transfer of income without transfer of asset
  • Section 61: Revocable transfer of asset
  • Section 62: Irrevocable transfer not revocable during transferee’s lifetime
  • Section 63: Meaning of revocable transfer
  • Section 64: Clubbing of income of spouse, minor child, and others

If a person transfers the right to receive income but keeps ownership of the asset, the income is taxed in the hands of the transferor, not the transferee.

A transfer is revocable if it can be cancelled or altered to give the asset or income back to the transferor. Any income from such an asset is taxable in the transferor’s hands.

If an individual’s spouse receives salary, commission, or any remuneration from a concern in which the individual has a substantial interest, such income is clubbed with the individual’s income unless the spouse possesses technical or professional qualifications and the income is due to those skills.

Income of a minor child is clubbed with that of the parent whose total income (before including the minor’s income) is higher.
Exception: Income of a minor from manual work or using their own skill, talent, or specialized knowledge is taxed in the minor’s hands.

Parents can claim an exemption of ₹ 1,500 per child per year u/s 10(32).

Yes. If an asset is transferred directly or indirectly to the spouse of a son, income arising from it is clubbed with the transferor’s income (Section 64(1)(vi)).

If an individual transfers property to his HUF without adequate consideration, any income derived from that property is taxable in the individual’s hands, not the HUF (Section 64(2)).

Clubbing applies even to indirect transfers. Cross-gifting (husband gifts to wife’s brother; wife gifts to husband’s sister) intended to avoid clubbing may still attract scrutiny if the intent is to evade tax.

Yes, if the trust is revocable or the transferor retains control, income is taxable in the transferor’s hands u/s 61–63. For irrevocable trusts, clubbing doesn’t apply after the transfer becomes final.

Yes. When income is clubbed, losses from the same transferred asset are also clubbed in the transferor’s return.

Use the “Schedule SPI – Income of specified persons includible in income of the assessee” in ITR-2/ITR-3. Mention the name, PAN, and relationship of the person whose income is being clubbed.

  • Ensure transfers are made for adequate consideration.
  • Avoid revocable deeds or retaining control.
  • Keep clear documentation if gifts are genuine.

Yes. If you gift an asset (like shares or property) and it generates capital gains for the transferee, the capital gain is taxed in your hands if clubbing provisions apply.

When both have independent skills or employment, each is taxed separately — clubbing doesn’t apply if income arises from personal effort or unrelated sources.

Pro Tips

  • Always maintain gift deeds or transfer documents showing adequate consideration.
  • Declare minor child’s exempt income separately to claim ₹ 1,500 u/s 10(32).
  • If you gift money to your spouse for investment, subsequent income (interest, dividends) is taxable in your hands.
  • Use Schedule SPI (Specified Persons’ Income) correctly — missing this may trigger notices.
  • Plan transfers carefully; avoid revocable clauses unless necessary.

Quick Checklist

1️⃣ Identify any income/assets transferred to relatives or minors.
2️⃣ Review if consideration or control exists — if not, clubbing applies.
3️⃣ Add minor-child income with the higher-income parent.
4️⃣ Report details in Schedule SPI (Specified Persons’ Income)
5️⃣ Keep gift/transfer evidence for scrutiny.

Related Resources

Clubbing of Income — Clear Answers on Section 60–64, Schedule SPI & Practical Tips

When Someone Else’s Income Becomes Yours — Clubbing of Income FAQs

Sources

Disclaimer: These FAQs on Clubbing of Income are prepared for general informational purposes only, based on Sections 60 to 64 of the Income-tax Act 1961 and the Finance Act 2025. They do not constitute professional advice. For specific queries, consult the official Income Tax Department or a qualified Chartered Accountant.