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

Mr. Iyer gifted Rs 5,00,000 in cash to his wife, Meera, who deposited it in a bank fixed deposit earning 8% per year. In the tax year 2026-27 she earned interest of Rs 40,000 on this deposit. She reinvested the interest in another deposit and earned Rs 3,200 on it during the same tax year. Meera has no other source of income. What amount will be clubbed in Mr. Iyer's total income?

Rs 40,000 is clubbed with Mr. Iyer. Interest on the cash gifted to his wife is taxed in the donor's hands. The Rs 3,200 earned by reinvesting that interest is income on income, so it is not clubbed and remains taxable in Meera's own hands.

  1. ARs 43,200
  2. BRs 40,000Correct
  3. CRs 3,200
  4. DNil

Explanation

Income from an asset received from the spouse without adequate consideration is clubbed, so the Rs 40,000 interest on the gifted sum is added to Mr. Iyer's income. The Rs 3,200 is income on income, earned from the reinvested interest, and is not clubbed. It is taxed in Meera's own hands. Adding both (Rs 43,200) wrongly clubs the second-level income.

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