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

Vikram transferred 1,000 shares of a company to a trust on 1 May 2026 with a condition that the dividend would be paid to his wife Pooja for the next 10 years; the shares remain his property. Dividend of Rs 40,000 was received by Pooja in tax year 2026-27. Separately, Vikram transferred a house to a revocable trust that earns Rs 70,000 rent. Which statement is correct for clubbing with Vikram's income?

Rs 1,10,000 is clubbed with Vikram. The Rs 40,000 dividend is clubbed because the income was transferred while the shares stayed with him, and the Rs 70,000 rent is clubbed because the house was transferred under a revocable arrangement.

  1. AOnly Rs 40,000 is clubbed, as the trust income is taxed with the trust
  2. BRs 1,10,000 is clubbed: the dividend because he transferred income without transferring the asset, and the rent because the transfer is revocableCorrect
  3. COnly Rs 70,000 is clubbed, as the dividend belongs to Pooja
  4. DNothing is clubbed because both transfers are to a trust or relative

Explanation

Income transferred without transferring the asset is taxed in the transferor's hands, so dividend of Rs 40,000 is included. Income from assets under a revocable transfer is also included in the transferor's income, so Rs 70,000 is added. The total is Rs 1,10,000.

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