Under the Income Tax Provisions, in certain situations, the income of spouse and minor child is combined with that of the individual’s income and taxed in the hands of the individual. These situation are explained as below:

Section 64(5) of Income Tax Act says that while computing the total income of any individual, following income arising directly or indirectly, is also included:-

a) income arising to the spouse of the individual by way of salary, commission, fees or other form of remuneration (either in cash or in kind), from a concern, provided such individual has substantial interest .
However above statement is not applicable for income of spouse arising solely on account
of his/her technical/professional qualification.

b) income arising to the spouse of the individual from assets transferred by such individual to his/her spouse, directly or indirectly.
However, the above statement is not applicable for transfer for adequate consideration or
for an agreement to live apart.

c) income arising to the spouse of the individual from assets transferred by such individual to his/her son’s wife ,directly or indirectly.
However, the above statement is not applicable for transfer for adequate consideration.

d) income arising to any person or AOP, from assets transferred by such individual to such
person or AOP. The income to be clubbed is from the part of such assets which is for the
immediate or for the deferred benefit of his or her spouse.

e) income arising to any person or AOP, from assets transferred by such individual to such
person or AOP. The income to be clubbed is from the part of such assets which is for the
immediate or for the deferred benefit of his son’s wife.

e) income arising or accruing to his minor child- However the above clause is not applicable if the child is suffering from disability specified in section 80U. The clause is not applicable for income arising or accruing to minor child on account of any manual work done by him or activity involving application of skill. talent, specialized knowledge & experience.

Here, one important thing to keep in mind, while doing tax planning, is that, the provision does not talk about major child. Thus, income on the underlying assets transferred will be taxed in the hands of the major child and not with the parent.

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