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

Vikram transfers an income-yielding asset to his son's wife, Pooja, without adequate consideration. Which statement correctly describes the tax position of income from that asset?

Income from an asset given by Vikram to his daughter-in-law without adequate consideration is clubbed in Vikram's total income. The clubbing rule covers transfers to the son's wife as well, so the transferor remains taxable on the income.

  1. AIt is clubbed in Vikram's incomeCorrect
  2. BIt is taxed in Pooja's hands only, as she is not the spouse
  3. CIt is exempt for both
  4. DIt is clubbed in the income of Vikram's son always

Explanation

The clubbing provision on transfers without adequate consideration also covers transfers to the son's wife. The income from the asset is therefore included in the transferor's, Vikram's, total income. Taxing it only in Pooja's hands would defeat the anti-avoidance purpose of the rule.

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