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CS Executive · Tax Laws and Practice · Clubbing Provisions and Set Off and Carry Forward of Losses

Deepak's wife Nisha is a partner in a firm where Deepak has no interest. Nisha receives a salary of Rs 3,00,000 as a working partner, and she has technical qualifications relevant to the firm's business. Under the clubbing provisions, how is the salary treated?

The salary is taxed in Nisha's own hands. Clubbing applies to a spouse's remuneration only when the other spouse has a substantial interest in the concern, and even then it is excluded for qualified spouses. Deepak has no interest, so no clubbing arises.

  1. AClubbed with Deepak because she is his spouse
  2. BTaxed in Nisha's hands, as she has technical or professional qualifications and the income is attributable to themCorrect
  3. CClubbed with the higher earner of the couple
  4. DExempt from tax

Explanation

Remuneration of a spouse from a concern in which the other spouse has a substantial interest is clubbed, unless the spouse has technical or professional qualifications and the income is solely attributable to the application of them. Here Deepak has no interest in the firm, so clubbing does not arise, and Nisha is also qualified. The salary is taxed in Nisha's hands.

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