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

Mohan's total income in tax year 2026-27 includes a share of profit of Rs 2,00,000 from a partnership firm, and Rs 25,000 of salary from the same firm paid to his wife Leela, who has no professional qualification and no experience relevant to the firm's business. Mohan holds a substantial interest in the firm. How much is clubbed with Mohan's income on account of Leela's salary?

Rs 25,000 is clubbed with Mohan's income. Because he has a substantial interest in the firm and his wife Leela has no relevant technical or professional qualification for the work, her entire salary from the firm is included in his total income.

  1. ARs 25,000, as the salary is clubbed since she has no technical or professional qualification and the husband has substantial interestCorrect
  2. BNil, as the salary is a deductible business expense for the firm
  3. CRs 2,25,000, as the firm's whole profit is clubbed
  4. DRs 12,500, being half of the salary

Explanation

Where an individual has a substantial interest in a concern and the spouse earns remuneration from it without technical or professional qualifications related to the work, that income is clubbed with the individual. Hence the full Rs 25,000 is added to Mohan's income. The profit share is separate and is exempt in his hands, and no half-sharing rule exists.

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