CLUBBING PROVISIONS FOR MINOR’S INCOME!
Exemption for minor’s income fixed at Rs.1,500 in 1992
Has not been revised even after 20 years of the provision!
Until 1991-92, all income of a minor, other than that covered by the special clubbing provisions of Section 64 of the Income-tax Act was entitled to independent assessment in his own hands. Circumventing the said clubbing provisions not being difficult, a number of avenues for augmenting income and wealth assessable in the minor’s own hands were wide open. It was thus possible to avail of valuable tax savings through the independent tax assessments of minors.
Such independent income/wealth enjoyed by the minors became a source of envy for the Finance Minister, who while introducing the Finance Bill, 1992 struck a major blow on tax planning for minors by providing that all income/wealth of a minor would be liable to be clubbed with the income/wealth of his parent. Section 64(1A) thus provides that “in computing the total income of any individual, there shall be included all such income as arises or accrues to his minor child.” (more…)
TAX IMPLICATIONS OF REMUNERATION TO WIFE
Clubbing of income is not attracted where remuneration is paid to spouse possessing professional or technical qualifications!
Keeping in view the family system prevailing in India where the financial affairs of the family are generally managed and controlled by the male head of the family, it is common to come across situations where the husband plans deriving income in the hands of his wife, thus aiming to reduce his income-tax tax liability. (more…)
