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

Sunil gifted Rs 6,00,000 to his wife Kavita on 1 April 2026. She invested the whole amount in fixed deposits at 8% p.a. for the full tax year 2026-27 and earned interest of Rs 48,000. She reinvested this interest in a second deposit on 1 January 2027, which earned Rs 1,200 by 31 March 2027. Kavita has no other source of income. What amount is clubbed with Sunil's income for the tax year 2026-27?

Rs 48,000 is clubbed with Sunil's income. Interest on the gifted money is income from the transferred asset, so it is clubbed, but the Rs 1,200 earned by reinvesting that interest is income on income and is taxed separately in Kavita's hands.

  1. ARs 49,200
  2. BRs 1,200
  3. CRs 48,000Correct
  4. DNil

Explanation

Income from the asset directly transferred to the spouse without adequate consideration is clubbed: Rs 48,000. Income earned on the accumulated income (Rs 1,200, second-generation income) is not clubbed and is taxed in Kavita's hands. Rs 49,200 wrongly includes the income on income.

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