Skip to content

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

Rohit transfers shares to his wife Meena without adequate consideration. Under the clubbing principle, the dividend received by Meena on those shares is generally:

The dividend is taxed in Rohit's hands. When an individual transfers an asset to his spouse without adequate consideration, the income arising from that asset is clubbed with the transferor's income, regardless of the spouse being the legal owner.

  1. ATaxed in Meena's hands only, since she is the legal owner
  2. BTaxed in Rohit's hands, as income from the asset transferred to the spouse indirectly or directly without adequate considerationCorrect
  3. CExempt in both hands
  4. DSplit equally between Rohit and Meena

Explanation

Where an asset is transferred to the spouse without adequate consideration, the income from that asset is clubbed with the transferor's income. Option A is wrong because legal ownership does not stop clubbing. Equal split has no basis in the rule.

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