Section 64 of Income Tax Act, 1961 (Clubbing of Income)

[Haresh Raithatha]

Issue : Does the provision of clubbing apply In a case where husband gives cash as gift to wife?

[Haresh Raithatha]

Consider FDR as a gift rather than Cash.

As per section 64(1)(iv), income of individual is to include income of spouse from assets transferred to the spouse without adequate consideration.

hence interest on FDR will be clubbed in the hands of husband only.

AI Summary

Clubbing of income applies where spouse receives a fixed deposit as a gift; interest is taxable to the transferor.
Clubbing of income applies where an asset is transferred to a spouse without adequate consideration: income earned by the spouse from that asset is included in the hands of the transferor. In the case of a gifted fixed deposit, the interest arising on the deposit is to be clubbed with the transferor spouse's income, attributing income from the gifted asset to the transferor and preventing tax avoidance by shifting income-producing assets.