Section 99: income of individual to include income of spouse, minor child, etc

Spouse's remuneration from a substantial-interest concern

Income by way of salary, commission, fees or other remuneration (cash or kind) paid to the individual's spouse from a concern in which the individual has a substantial interest is included in the individual's total income - unless that income is solely attributable to the spouse's own technical or professional knowledge, experience or qualification.

Income from assets transferred to spouse or son's wife

Income from assets transferred (directly or indirectly) by the individual to the spouse, other than for adequate consideration or in connection with a living-apart agreement, is included in the individual's total income.

Similarly, income from assets transferred (directly or indirectly) on or after 1 June 1973 by the individual to the individual's son's wife, other than for adequate consideration, is also included in the individual's total income.

Income arising to any other person or association of persons from assets transferred (directly or indirectly), other than for adequate consideration, is included in the individual's total income to the extent that income is for the immediate or deferred benefit of the spouse or son's wife (except, for assets transferred to the son's wife's benefit, if transferred before 1 June 1973).

Substantial interest: the 20% test

An individual is deemed to have a substantial interest in a concern if: for a company, shares carrying at least 20% of the voting power are beneficially owned, at any time during the tax year, by the individual alone or jointly with relatives (excluding fixed-dividend-only shares); for any other concern, the individual (alone or with relatives) is entitled to at least 20% of its profits at any time during the tax year.

Income of a minor child

The income of a minor child is included in the individual parent's total income, except income that arises from work done by the child, or from applying the child's own skill, talent, specialised knowledge or experience, or income of a minor child suffering from a disability of the nature specified in Section 154.

Minor's income is clubbed with whichever parent's total income (before such inclusion) is greater, if the parents' marriage subsists, or with the parent who maintains the child during the tax year if the marriage does not subsist. Once clubbed with one parent for a year, it is not clubbed with the other parent in a later year unless the Assessing Officer, after hearing the other parent, is satisfied it should be.

If the transferred asset is invested in a business or partnership

If an asset transferred to a spouse or son's wife (as described above) is invested in a business, or contributed as capital in a firm, the amount of income to be clubbed with the individual for a tax year is computed proportionately, based on the ratio of the value of the transferred asset invested/contributed to the total investment/capital as on the first day of that tax year, applied to the spouse's or son's wife's income/interest from the business or firm for that year.

HUF property converted from individual property

Where an individual converts their separately owned property into property belonging to their Hindu undivided family (by impressing it with the character of joint family property, throwing it into the common stock, or transferring it to the family without adequate consideration), the individual is deemed to have transferred the property, through the family, to the family members for joint holding - and the income from that property continues to be treated as the individual's income.

If such converted property is later partitioned among family members, income received by the individual's spouse on partition is deemed to arise to the spouse from an indirectly transferred asset, subject to the spouse-remuneration clubbing rule above. This conversion rule does not apply where the property was converted on or before 31 December 1969.

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