Income from other sources that is included in the assessee's overall income

Income Transfer without Asset Transfer

When an individual transfers an income to another without also transferring the asset from which the income originates, whether or not the transfer is revocable and regardless of whether it occurs prior to or following the effective date of the Income-tax Act of 1961, the transferred income must be included in the transferor's total income.

For instance, Owner X states that the rent going forward would belong to his buddy Y but that the home will still be owned by X. X owns a house that rents for Rs. 10,000 per month.

The rental income in this situation must be included in X's income in order to determine his total income because there is merely a transfer of revenue, not an asset. Get information about 80c.

More clarity can be gathered at 80g.

Earnings from revocable asset transfers

Any income arising from or derived from assets that have been revocably transferred by one person to another must be included in the transferor's total income.

There are few exceptions when clubbing rules do not apply even in the revocable transfer

Any income received by any individual in any of the following two situations shall not be subject to the above section:-

  (a) Transfer not reversible during the beneficiary's or transferee's lifetime:- The income from the acquired asset is not included in the transferor's total income if the transfer is made through a trust that is irrevocable during the beneficiary's lifetime or any other transfer that is irrevocable during the transferee's lifetime, as long as the transferor receives no direct or indirect benefit from the income. Even if the transfer may not be revocable during the transferee's lifetime, if the transferor obtains direct or indirect benefits from such income, it must be included in his total income.

  (b) Transfer made prior to April 1, 1961 and not revisable for more than six years:- If the transferor does not get direct or indirect benefits from the income, the revenue from an asset transferred prior to 1.4.61 that was not revocable for a length of time exceeding six years is not included in the transferor's total income.

In each of the aforementioned scenarios, the income attributable to the transfer will be included in the transferor's overall income as and when the right to revoke the transfer arises.

What are you waiting for? Here is your URL tax exemption under section 80g.

What revocable transfer means

A transfer is regarded as reversible if:-

(a) it includes any clauses allowing for the direct or indirect retransfer of all or any portion of the assets or income to the recipient, or

(b) it grants the transferor the right to reassume control, directly or indirectly, over all or any portion of the income or assets, in any form.

Even if only a portion of the revenue from the transferred asset was used for the transferor's advantage, this clubbing rule would still be in effect. The whole revenue from the transferred asset is included in the transferor's total income after the transfer is reversible.

Further info can be fetched at 80g registration.