Combining on Income Provisions under Income Tax Act

Under the Income-tax Act, 1961, an assessee is usually taxed with respect to his own income. However, there are few cases where an assessee need to pay tax in respect of income of other person. The provisions for the same are taken under sections 60 to 64 of the Act. These provisions have been enacted to counteract the tendency on the part of the tax-payers to dispose of their property or deliver their income in such a way that their tax liability can be avoided or minimized.

E.g, in case of people, income-tax is levied on a slab system on the overall income. The tax system is progressive i.e. as the income enhances, the applicable rate of tax increases. Few taxpayers in the higher income bracket have a tendency to direct some part of their income to their family, minor child etc. to minimize their tax burden. For preventing such tax avoidance, combining provisions have been added in the Act, under which income arising to few persons (like spouse, minor child etc.) have to be added in the income of the individual who has directed his income for the requirement of computing tax liability.

Circumstances Where Income of Different Persons Added in Assessee’s Income

Income Transferred Without Transfer of Asset (Section 60)

When an individual transfers the income gathering to an asset without the transfer of the asset itself, These income needs to be added in the total income of the sender, whether the transfer is reversible or irreversible.

Example – Mr. M confers the right to receive rent in respect of his house property to his wife, Mrs. M, without transferring the house itself to her. In such case, the rent received by Mrs. M will be added with the income of Mr. M.


Income Coming From Revocable Transfer of Assets (Section 61)

This income is to be added in the hands of the sender.

A transfer is deemed to be reversible if it –

  1. has any provision for re-transfer of the complete or any part of the income or assets to the sender; or
  2. gives access to re-assume power over the whole or partial of the income or the asset.

Exceptions Where Adding provisions are not Attracted even in case of Revocable Transfer (Section 62)

Section 61 won’t apply to any income starting to any individual in the below two cases –

  1. Transfer not irreversible during the life time of the beneficiary or the sender
  2. Transfer made before April 1, 1961 and not reversible for a time period more than six years

Income of Minor Child (Section 64(1A))

All income coming or accruing to a minor child (including a minor married daughter) shall be added in the total income of his or her parent. The income of the minor child will be added with the income of that parent, whose total income, before including minor’s income, is more.

The parent, whose total income, the income of the minor child or children are added, will be entitled to removal of such income subject to a maximum of `1,500 per child under section 10(32).

The below income of a minor child will, however, not be added in the hands of his or her parent –

  1. Income from manual work done by him oractivity involving application of minor’s skill,talent or specialized knowledge andexperience; and
  2. Income of a minor child suffering from anydisability specified in section 80U.


Enquire with Certicom Consulting for any further queries.