A. CLUBBING means someone else’s income is added to income of a person and charged a tax.
Usually it happens when person gives GIFT to wife or minor son.
Income Earned from Asset transferred to wife or minor is added to income of husband
A. There are certain instances when clubbing is not attracted.
-If GiFT is given before marriage.
– If Gift is given at the time of divorce
A. There is No upper limit of GIFT to spouse.
No. However, Clubbing can defeat purpose of tax saving. Income on asset is clubbed to
A. If husband is paying certain amount to wife as professional fees then husband can show that amount as expense
while wife will have to show it as Revenue in her account.If both are in 30% tax bracket
there is NO tax saving. However, if wife is in 10% bracket then you can save tax.
TDS deduction is not required in this case
A. If transfer is shown as professional fees then No clubbing is attracted.
If transfer is not professional fees then LTCG on ELSS of wife will be added to income of
A. Clubbing has NO benefit unless there is negative income from asset.
E.g. In above example, long term capital Loss in ELSS of wife can be clubbed to husband
income and tax is reduced
A. If wife uses deposit to constuct building or buy machine, she would get benefits of depreciation.
Deposits are shown Loan/ Advances in balance sheet. It’s not money of wife. Its refundable deposit
If used INTELLIGENTLY transfer of money from one spouse to other and parent can save
tax legally. It can create assets.
Please note that INCOME OF INCOME is NOT clubbed.
That means If husband give 1 lac deposit. Wife earns Rs. 10000 and this income is
clubbed to income of husband. If that Rs. 10000 is invested and Rs 1000 is earned then
this is income of wife. Its not clubbed to husband income.
This is very IMPORTANT concept
A. Salaried doctor can’t give PRETAX money to wife and show as Expenses.
He can give as much as money from POST TAX income as GIFT
This is tax free in hands of wife. However, income from that money will be clubbed to
income of husband
A. Husband and wife are different persons . They can give loan to each others.
A. It becomes her Revenue and she will have to pay Tax
A. Reason of Loan will not be asked.
A. Clubbing Increase TAX burden. It does not save tax.
A. HUF can gift Unlimited money to its members. It’s TAX free in hands of members.
ANS; HUF can give gift to Any member. It’s better to have GIFT deed as evidence.
A. TAX TIP.