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CMA Intermediate · Direct and Indirect Taxation · Clubbing of Income

Aarav, aged 13, is a trained child classical singer and earns Rs 90,000 during the year from stage performances. He also earns Rs 4,000 interest on a bank deposit that was funded by his grandfather's gift. Both his parents have taxable incomes. Which statement on clubbing in the parent's hands is correct?

Only the Rs 4,000 interest is clubbed with the higher-income parent. Aarav's Rs 90,000 from singing arises from his own skill and talent, which is excluded from clubbing and taxed in his own hands.

  1. ABoth the Rs 90,000 and the Rs 4,000 are clubbed with the parent having the higher income
  2. BOnly the Rs 90,000 is clubbed; the interest stays with Aarav
  3. CNeither amount is clubbed; both are taxed in Aarav's hands
  4. DThe Rs 4,000 interest is clubbed with the parent having the higher income, while the Rs 90,000 earned through his own skill is not clubbedCorrect

Explanation

Income of a minor child is generally clubbed with the parent having the higher income. Income earned by the minor through manual work, or through an activity involving his own skill, talent or specialised knowledge, is excluded from clubbing. So the Rs 90,000 stays with Aarav, while the Rs 4,000 interest on the deposit is clubbed. The option clubbing both ignores the skill exclusion.

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