Skip to content

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

Ravi transfers a house property to his wife Sita without adequate consideration, and Sita earns rent of Rs 1,80,000 for the year. Applying the general clubbing principle, in whose hands is the rent taxable?

The rent of Rs 1,80,000 is taxable in Ravi's hands. When an individual transfers an asset to his spouse without adequate consideration, income from that asset is clubbed with the transferor's income, so Sita's legal ownership does not shift the tax liability away from Ravi.

  1. ASita alone, as she is the legal owner
  2. BRavi, because income from an asset transferred to the spouse without adequate consideration is clubbed with the transferor's incomeCorrect
  3. CShared equally between Ravi and Sita
  4. DNot taxable in anyone's hands as it is a family transaction

Explanation

Where an asset is transferred to the spouse without adequate consideration, the income from it is clubbed with the transferor's income. Taxing Sita alone ignores the clubbing rule, and there is no equal split provision.

Did you get it right without looking?

One question tells you little. A timed set on Clubbing Provisions and Set Off and Carry Forward of Losses shows your real accuracy, how long you take and where you lose marks.

Practise Clubbing Provisions and Set Off and Carry Forward of LossesFree diagnostic mock

More Clubbing Provisions and Set Off and Carry Forward of Losses questions