38.  No Clubbing of Incomes - when Husband Pays Remuneration to a Professionally Qualified Spouse

Under the general provisions of the Income Tax Act, as provided in Section 64(1)(ii), if an assessee pays any salary, commission, fees or any other form of remuneration, whether in cash or kind to his spouse, from a concern in which he has substantial interest, it would be clubbed with his total income. Thus, generally speaking, a husband cannot pay any remuneration from his proprietorship or partnership firm to his wife. A person could be said to be substantially interested in a concern where he and his relatives are entitled to 20% of the profits or have 20% of the voting power. This makes it very difficult for the husband to pay remuneration to his wife or vice versa.
However, there is an exception to this general rule. Where remuneration is paid to the spouse because of certain technical or professional qualifications possessed by her or him and the remuneration is solely attributable to the application of professional knowledge or experience, the remuneration so paid to the spouse would not be added to the income of the other spouse making the payment. Thus, there is no clubbing of remuneration paid to the professional wife of a person with his own income. For example, a doctor who maintains a nursing home and employs his wife, also a qualified doctor, and pays her a remuneration, the lady doctor’s remuneration would not be clubbed with the income of the doctor husband. Hence, whenever any remuneration is paid to ladies in particular, from concerns where the husbands are substantially interested it should be ascertained that the ladies possess appropriable technical and professional qualification. The remuneration can then be attributable solely to their professional knowledge and experience. Professionals who wish to employ their wives should see that they are professionally qualified. It is not necessary that the lady concerned must undergo academic education; it would suffice if she acquires professional or technical knowledge through a Postal Diploma Course, which may or may not be recognised by the Government but is sufficient to impart professional or technical skill for a job.
 

Thus, it is very clear from the above mentioned provisions of the law that the addition to the income of the other spouse would be made only if the spouse does not possesse technical or professional qualification. A reading of the said Section 64(1)(ii) makes it very clear that the provisions of clubbing of income would be attracted only if two conditions are not satisfied, namely (1) that the spouse must definitely possess technical or professional qualification and that such technical or professional qualifications must relate to the post which is occupied by the said spouse and (2) that the salary or fees which are being paid to the spouse must be attributable to the application of his or her technical or professional knowledge. Hence, there may be situations when the wife happens to possess technical and professional qualification and thus receives salary from the business organisation of the husband but still such salary or remuneration might get clubbed with the income of the husband because the technical or professional qualification so possessed by the wife might be such which cannot be put to use in the business of the husband. For example, if a husband who runs a small SSI unit manufacturing scooter parts makes payment of salary to his wife who possesses technical and professional qualification of a Doctor having completed her MBBS, then in this case the salary paid to his wife having MBBS degree cannot be allowed as a deduction while computing the income of the husband because the wife, though possessing technical/professional qualification of a doctor cannot be put to use in the small business of the husband, hence the remuneration would be clubbed.


In the case of CIT v. D. Rajagopal 154 ITR 375 the Kerala High Court held that a mere graduate degree would not be treated as a technical or professional qualification. Similarly, in yet another case it has been held that matriculation is neither a technical or professional qualification so as to meet the requirements of the above section. If a “Computer Diploma” is obtained by the spouse and then she is paid salary/remuneration the question of clubbing of income would not arise.
Sec. 143(3) : Scrutiny Assessments by Income Tax Department
“Penalties” Under Income Tax Act. 1956
How is a Search Operation Conducted by Income Tax Department ?
Surveys for Checking Ostentatious Expenditure
Surveys for Enforcing Compliance with Provisions of TDS
“Summon” U/s 131 of Income Tax Act.
Investigation by Income Tax Department:
Appellate Authorities of Income Tax Department
Power to Call for Information U/s Sec. 133(6) of Income Tax Act.
Specific Surveys U/s 133A(1) of Income Tax Act.
Types Of Income Subject To TDS [Deduction Of Tax At Source]
Pre-Requisite For Claiming Income Tax Refund
Benefits of Filing Income Tax Returnsn
Section-139(9): Defective Tax Return
 
Get Updated ...
Tax Tutorials
E-Payment Of Direct Taxes
Filing Of Return Of Income
Interest for Delay in Filing the Return of Income [Section 234 A]
Interest for default in Payment of Advance Tax [Section 234B]
Provisions Of 'Income-Tax Law' Useful For Non-Residents
MAT (Minimum Alternate Tax)
AMT ( Alternative Minimum Tax)
Tax On Long-Term Capital Gains (LTCG)
Tax On Short-Term Capital Gains (STCG)
Exemption[ Section-54] For Capital Gains Arising On Transfer Of Residential House Property
Tax Treatment Of Gifts Received By An Individual Or HUF
Set Off And Carry Forward Of Loss Under The Income-Tax Act
Interest For Delay In Payment of TDS/TCS And For Non-Payment Of Tax Demanded
Tax Deduction/Collection Account Number (TAN)
How to apply for PAN ?
Refund Of Excess Tax Paid By The Taxpayer (Sections - 237 to 245 )
Presumptive Taxation Scheme of Section 44AD
Presumptive Taxation Scheme of Section 44ADA
Presumptive Taxation Scheme of Section 44AE
Deduction in respect of Life Insurance Premium, PPF, NSC, etc. [Section 80C]
Deduction in respect of Medical Insurance Premium [Section 80D]
Tax Deducted at Source (TDS) from Interest, other than Interest on Securities (Section-194A)
Tax Deducted at Source (TDS) from Interest on Securities (Section 193)
Late Filing Fees And Penalty For Failure To Furnish/Delay In Furnishing The TDS/TCS Statements
LIBRARY @ Tax Management
TAX & INVESTMENT GUIDE FOR "NRI"- Non-Resident Indians !
GUIDE & FAQ @ TAX
GRAPHICAL PRESENTATION @ TAX
TIPS & TRICKS @ TAX
MANAGERIAL & FINANCIAL DECISIONS @ TAX
5 GOLDEN RULES OF TAX PLANNING
FAMILY TAX PLANNING
DEDUCTIONS FROM YOUR INCOME
EXEMPTED INCOMES
HUF - FORMATION, MANAGEMENT & TAX PLANNING
COMPUTATION OF GROSS TOAL INCOME
INCOME TAX @ GLANCE
MULTIPLE KNOWLEDGEBASE ON TAX
51 TIPS ON TAX PLANNING
APPEALS UNDER INCOME TAX
ASSESSMENTS
PENALTIES UNDER IT DEPATMENTS
TAX SAVING SCHEMES
TAX READY RECKONER
TAX RATES
PROSECUTIONS UNDER INCOME TAX DEPARTMENT
TAXATION SYSTEM IN INDIA
CHARITABLE & RELIGIOUS TRUST - TAXATION
PRESCRIBED FORMS WITH with Section / Rules
KNOWLEDGE BASE !
New Topics @ Tax KnowledgeBase...
 
 

Most Popular Topics :

Corporate Tax ( Taxation in Companies)
FAQ on TDS on Salaries
FAQ on Taxable Income
FAQ on Filing of Income Tax Return
Graphical Chat Presentation of Provision of Motor Car / Other Vehicles [Rule 3(2)(A)&(B)]
'Appeals' Under Income Tax Act. 1961.
'Assessments' Under Income Tax Act. 1961.
List of Exempted Incomes (Tax-Free) Under Section-10
Income Under the Head ' Business and Professions' [Section 28 to 44]
Income Under the Head ' Capital Gain'
Income Under the Head ' House Property '[Section- 22 - 25 ]
Income Under the Head "Salary"
[Section 15-17]
Income Tax on 'Partnership Firms'
PENALTIES Under Income Tax Act. 1961.
Tax Saving Schemes for Individual -Instant Guide
New Tax Rates For FY 2017-18 & AY 2018-19
"Exempted Incomes" under Income Tax Act.
Charitable & Religious Trust :Formation, Registration, & Taxation
Hindu Undivided Family [HUF] - Formation, Management and Taxation
 

Most Popular Links :

Clubing of Income Deduction U/s 80C
Allowances Us-17(3) Exemption-Salary
Tax Amendment-2015 Taxable Income
Clubing of Income Tax Deductions
HUF Deduction HUF Investment
Gift by HUF HUF Tax Planning Tips
Tax Saving Schemes Tax Planning Tips
Refund of Tax Fringe Benefit Tax-FBT
Return Filing Assessment / Scrutiny
Notice from I.T. Dept. Incomes Types @ TDS
Exemptions-Tax Returns “Summon” U/s 131
'Black Money' @ I.Tax Big Gifts To Be Taxed
'Appeals' under I.Tax Assessment @ I.Tax
Exempted Incomes Capital Gain
Business & Professions House Property
Salaries @ I.Tax Partnership Firm
'Penalty' under I.Tax Act. Tax Ready Reckoner
Charitable Trust Useful Links @ I.Tax
 
Guide & FAQ on Tax Knowledgebase @ Taxation Income Tax @ Glance HUF - Formation, Planning & Taxation
Charitable & Religious TRUST NRI (Tax Planning,Saving,Investemnt) Budget 2017-2018 GST (FAQ, Law, Act. Rules, Schedule, Enrollment)
FAQs - Income Tax India Tax Tutorials    
______________________________________________________________________________________________________________________________________________________

Disclaimer:
All efforts are made to keep the content of this site correct and up-to-date. But, this site does not make any claim regarding the information provided on its pages as correct and up-to-date. The contents of this site cannot be treated or interpreted as a statement of law. In case, any loss or damage is caused to any person due to his/her treating or interpreting the contents of this site or any part thereof as correct, complete and up-to-date statement of law out of ignorance or otherwise, this site will not be liable in any manner whatsoever for such loss or damage.

The visitors may click here to visit the web site of Income Tax Department for resolving their doubts or for clarifications