Income Tax Rule: Spouse's Salary Clubbed with Individual's Income if Lacking Expertise and Substantial Interest Exists.
Under section 64(1)(ii) of the Income Tax Act, remuneration received by a spouse can be clubbed with the individual's income if the individual has a substantial interest in the concern and the spouse is employed without technical or professional knowledge. Substantial interest is defined as holding 20% or more equity shares or profit entitlement. In Illustration A, the salary of a spouse without relevant expertise is clubbed with the individual's income. In Illustration B, the spouse's justified remuneration, based on expertise, is not clubbed. The clubbing provisions apply only when the spouse lacks professional qualifications.
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