Normally, a person is taxed in respect of income
earned by him/her only. However, in certain special cases income of other
person is included (i.e. clubbed) in the taxable income of the taxpayer and in
such a case he will be liable to pay tax in respect of his income (if any) as
well as income of other person too.
The provisions of clubbing of income generally gets
attracted in following case of Assets transferred by way of -
i. Gift by an individual (Donor) to his/her
ii. Gift by Parents (Donor) to Minor Child or
Grandchildren or Daughter-in-law (Recipient)
note that above are some illustrations of clubbing of income in case of assets
transferred by way of gift and the same is not an exhaustive list.
such assets transferred, any income earned by the Recipient from the said gift
shall be clubbed in the income of the Donor.