Clubbing of Income
Clubbing of Income – NRI Taxation Simplified
By Classic Partner – Chartered Accountants & Advisors
What is Clubbing of Income?
Clubbing of Income refers to situations where the income of another person is added to (clubbed with) your own income and taxed in your hands, as per the Income Tax Act, 1961. Normally, you are taxed only on income earned by you. However, in certain cases – such as income of your spouse, minor child, or assets transferred without adequate consideration – the law requires that such income be taxed in your hands.
For NRIs, RNORs, and HNIs, clubbing provisions can have a significant impact on tax liability, especially when gifting or transferring assets to family members in India.
At Classic Partner, our Chartered Accountants provide clarity on these provisions and help you remain compliant while planning your taxes effectively.
Situations Where Clubbing Provisions Apply
1. Transfer of Income Without Transfer of Asset
If you transfer the income from an asset but still remain the owner of that asset, the income is taxable in your hands.
Example: An NRI gifts the rental income of a house to a sibling without transferring the house. The rent remains taxable in the NRI’s name.
2. Transfer of Asset Without Adequate Consideration
If you gift an asset to your spouse or son’s wife without fair consideration, the income from such asset is taxable in your hands.
Example: Mr. A gifts ₹1 lakh to his wife. She invests in a fixed deposit and earns interest. That interest will be taxed in Mr. A’s hands.
3. Spouse’s Income from a Concern with Substantial Interest
If your spouse earns income (salary, fees, or commission) from a business in which you hold 20% or more equity/profit share, and they are not employed based on their personal qualifications, the income will be clubbed with yours.
4. Minor Child’s Income
A minor child’s income (e.g., from bank deposits or investments) is clubbed with the parent having the higher taxable income.
Exceptions:
If the income is from the child’s own skill/talent/manual work
If the child is disabled (Section 80U)
Exemption: Up to ₹1,500 per minor child is allowed.
5. Revocable Transfer of Assets
If you transfer assets but retain control or have the right to revoke the transfer, the income from such assets is taxable in your hands.
6. Clubbing of Losses
Not just income—losses from assets that fall under clubbing rules are also carried into your taxable computation.
Why NRIs Should Pay Attention
Many NRIs transfer funds or assets to relatives in India to manage investments or gifts. Without careful tax planning, these transfers can trigger clubbing provisions and increase tax liability in India. Professional guidance ensures correct structuring and exemption usage.
How Classic Partner Helps
Our NRI tax experts guide you on:
Clubbing of income assessment and compliance
Structuring asset transfers to minimize tax exposure
NRI ITR filing and TDS refund claims
Tax planning for gifts, inheritance, and family transfers
Get Expert Help Today
Whether you’re an NRI transferring assets to family, or a resident parent managing investments in your child’s name, Classic Partner helps you handle clubbing rules efficiently and file compliant returns.
Contact Classic Partner – your trusted Chartered Accountants for NRI taxation and income clubbing advisory.
