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CMA Intermediate · Direct and Indirect Taxation · Clubbing of Income

Anil and Bina are married and live together. Their minor son Chirag earns ₹18,000 as bank interest on a fixed deposit made in his name from a gift by a relative. Anil's total income (excluding this) is ₹9,00,000 and Bina's is ₹6,00,000. Ignoring any small exemption for a minor child's income, in whose total income is Chirag's interest clubbed?

The interest is clubbed in Anil's hands. When parents are married, a minor child's income is added to the income of the parent with the higher total income, and Anil's ₹9,00,000 is greater than Bina's ₹6,00,000. It is not split or taxed separately.

  1. ABina, because the mother is always the person taxed
  2. BAnil, because his income is higherCorrect
  3. CBoth equally, ₹9,000 each
  4. DNobody, as it is the minor's own income and is taxed only in his hands

Explanation

Where the marriage subsists, a minor child's income is included in the total income of the parent whose total income (excluding the child's income) is greater. Anil's income of ₹9,00,000 exceeds Bina's ₹6,00,000, so ₹18,000 is clubbed with Anil. Splitting it equally is not provided for.

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