A lot of confusion persists among the taxpayers about the income required to be clubbed and the method of clubbing. So here are the provisions for clubbing of salary, commission, fees or any other remuneration of the spouse with regard to the Income Tax Act, 1961(the Act).

As per Section 64(1)(ii) of the Act, any salary, commission, fees or any other remuneration received directly or indirectly whether in cash, or in kind by a person from a concern in which the spouse has substantial interest shall be clubbed in the hands of spouse having substantial interest. However, remuneration solely attributable to the application of technical or professional knowledge and experience of the spouse is not clubbed irrespective of the fact whether such remuneration is received from a concern or any other person.

For this purpose an individual shall be deemed to have “substantial interest” in a concern in the following cases:

• If a concern is company where 20% shares are beneficially held by an individual along with his relatives any time during the previous year. For this purpose preference shares will be excluded.
• In other case where individual along with his relatives is entitled to receive 20% of the profit of such concern, at any time during the previous year.

In relation to an individual “relative” means husband, wife, brother or sister or any lineal ascendant or descendant of that individual.

In case where both the spouse possess substantial interest in a concern then clubbing shall be made in the hands of the spouse having higher income other than the income to be clubbed.

Tax Returns for Financial Year 2010 -11 (March 2011) has started.  Just mail us Form16/ Salary Certificate and details of other income, at info@taxmantra.com . We would take it from there to file your return of income.

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