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CA Intermediate · Taxation · Income of Other Persons included in Total Income of Assessee

Kavita, a tax resident, owns a business. Her husband Deepak is a partner in a firm and receives Rs 1,50,000 as interest on his capital and Rs 2,40,000 as salary from the firm. Kavita has a substantial interest in the firm, and Deepak has no professional qualification related to the firm's business. What amount is clubbed in Kavita's total income on account of Deepak's remuneration from the firm?

Rs 2,40,000 is clubbed in Kavita's income. Remuneration received by a spouse from a concern in which the other spouse has substantial interest is clubbed when the recipient lacks technical or professional qualifications. Only the salary is remuneration here, and interest on capital does not fall under this clubbing rule.

  1. ARs 2,40,000, being the salary onlyCorrect
  2. BRs 3,90,000, being salary and interest
  3. CNil, because the remuneration is taxed in Deepak's hands
  4. DRs 1,50,000, being the interest only

Explanation

Where the spouse has a substantial interest in a concern and the other spouse draws remuneration from it without technical or professional qualifications, that remuneration is clubbed with the spouse having the substantial interest. Only the salary of Rs 2,40,000 is remuneration. Interest on capital is not clubbed under this rule, so including it (Rs 3,90,000) is wrong.

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