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

Sandeep transferred 5,000 shares of a listed company to his wife Neha without consideration. Dividend of Rs 60,000 was received on them in tax year 2026-27. Neha invested all the dividend in a fixed deposit and earned interest of Rs 4,000 in the same year. What is the amount includible in Sandeep's total income on account of these items?

Rs 60,000 is included in Sandeep's income. The dividend arises from shares transferred to his wife without consideration and is clubbed, but the interest earned by investing that dividend is income from accumulated income and remains taxable in Neha's hands.

  1. ARs 64,000
  2. BRs 4,000
  3. CRs 60,000Correct
  4. DNil

Explanation

Income from the asset transferred to the spouse without adequate consideration is clubbed with the transferor, so the Rs 60,000 dividend is taxed in Sandeep's hands. Income earned on reinvestment of that income (the Rs 4,000 interest) is income on income and is not clubbed; it is taxed in Neha's hands. Rs 64,000 wrongly includes the secondary income.

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