Clubbing of Income: Spouse, Minor Child and Daughter-in-Law (Income-tax Act, 2025)

Clubbing of income means that income which legally arises to someone else is added to your total income and taxed in your hands. Under section 99 of the Income-tax Act, 2025, this happens for income of your spouse (from certain remuneration or from assets you gave without adequate consideration), your son's wife (from assets you gave her), your minor child (with exceptions), and any person or association that holds assets you transferred for the benefit of your spouse or son's wife. Section 100 then lets the department recover the related tax from the person who holds the asset.

This guide goes through each case, the exceptions, how to decide which parent is taxed for a minor child, and how the rules work in practice. Every point comes from the Act as amended by the Finance Act, 2026 (tax year 2026-27 onwards), with the section number alongside. Last reviewed on 10 November 2026.

What is clubbing of income under the Income-tax Act, 2025?

Section 99(1) says the total income of an individual for a tax year includes income arising directly or indirectly to certain other persons. The idea is simple: if you could shift income to a relative with lower income by handing over an asset for free, the law adds that income back to you. Section 99(5)(d) also says that for this section "income" includes loss, so a loss that arises to the other person is clubbed as well.

Whose income	What gets clubbed	Provision
Spouse	Salary, commission, fees or other remuneration (cash or kind) from a concern where you have a substantial interest	99(1)(a)(i)
Spouse	Income from assets you transferred to the spouse, directly or indirectly, without adequate consideration	99(1)(a)(ii)
Son's wife	Income from assets you transferred to her on or after 1 June 1973 without adequate consideration	99(1)(b)
Minor child	Income of the child, except the exclusions in the next section	99(1)(c)
Any person or association	Income from assets you transferred to them, to the extent it is for the immediate or deferred benefit of your spouse or son's wife	99(1)(d)
Your HUF	Income from your property that you convert into HUF property without adequate consideration	99(3)

When is a spouse's income clubbed with yours?

There are two separate triggers.

1. Remuneration from a concern where you have a substantial interest (section 99(1)(a)(i)). Your spouse's salary, commission, fees or any other remuneration, in cash or kind, from such a concern is added to the income of one of you. Income solely attributable to your spouse's technical or professional knowledge, experience and qualification is not clubbed.

You have a substantial interest in a concern under section 99(5)(a)(iii) if:

• for a company, shares carrying at least 20% of the voting power (not counting shares with a fixed rate of dividend) are owned beneficially by you, or jointly with your relatives, at any time during the tax year; or
• for any other concern, you, or you and your relatives together, are entitled to at least 20% of the profits at any time during the tax year.

2. Income from assets you transferred to your spouse (section 99(1)(a)(ii)). If you transfer an asset to your spouse directly or indirectly, otherwise than for adequate consideration or in connection with an agreement to live apart, the income from that asset is clubbed with yours. This clause is subject to section 25(a), covered below.

Which spouse is taxed when remuneration is clubbed?

Under section 99(5)(a), the remuneration income is included in the hands of the spouse whose total income before the inclusion is greater. Once included in one spouse's income for a tax year, it is not included in the other spouse's income for any later tax year, unless the Assessing Officer is satisfied that it should be, after giving the other spouse a chance to be heard.

What about the son's wife (daughter-in-law)?

Section 99(1)(b) clubs the income your son's wife earns from assets you transferred to her, directly or indirectly, on or after 1 June 1973 without adequate consideration. Income from her own money, her own work, or assets she got for adequate consideration stays with her. Section 99(1)(d) also catches the case where you give assets to a third party, such as a trust or firm, and the income is for the immediate or deferred benefit of your son's wife. Assets transferred before 1 June 1973 are left out for that benefit.

When is a minor child's income clubbed?

Section 99(1)(c) adds the income of your minor child to your total income. Three kinds of income are not clubbed:

• income arising on account of work done by the child;
• income from activities where the child's skill, talent, specialised knowledge or experience is applied; and
• income of a child who has a disability of the nature specified in section 154 (the disability deduction section, which refers to section 127 for the meaning of disability).

So bank interest on a fixed deposit in a child's name is clubbed. A child actor's fee or a child chess player's prize money is not.

Which parent is taxed on the minor child's income?

Section 99(5)(b) decides this:

• If the parents are married to each other (the marriage subsists), the income goes to the parent whose total income before the inclusion is greater.
• If the marriage does not subsist, it goes to the parent who maintains the child during the tax year.
• Once included in one parent's income for a tax year, it is not included in the other parent's income for any later tax year, unless the Assessing Officer is satisfied, after hearing the other parent, that it should be.

How is clubbed income calculated? Two worked examples

Example A: fixed deposit gifted to a spouse (tax year 2026-27). Ravi gives his wife Meena Rs 10,00,000 without any payment from her. She puts it in a fixed deposit that earns 7% a year.

Step	Figure
Asset transferred without adequate consideration	Rs 10,00,000
Interest for the year (7% of Rs 10,00,000)	Rs 70,000
Clubbed in Ravi's total income under section 99(1)(a)(ii)	Rs 70,000
Left in Meena's total income from this deposit	Rs 0

Assumptions: the interest all accrues in 2026-27 and the gift was not made under an agreement to live apart. If Meena had paid Ravi a fair price, the transfer would be for adequate consideration and section 99(1)(a)(ii) would not apply. Any interest earned on the interest itself is not covered by this extract of the section, so check that point on the facts.

Example B: a minor child with two kinds of income (tax year 2026-27). Aarav is 12. His father Suresh has a total income of Rs 9,00,000 and his mother Kavita has Rs 12,00,000 before any inclusion. The parents are married. Aarav earned Rs 40,000 as interest on a deposit in his name and Rs 90,000 as fees for acting in an advertisement.

Step	Treatment	Amount
Interest on deposit	Not from the child's work or skill, so clubbed	Rs 40,000
Acting fees	Skill and talent applied, so excluded under 99(1)(c)(ii)	Rs 90,000 stays with Aarav
Exclusion for clubbed child income	Schedule III, Sl. No. 17 (section 11): up to Rs 1,500 per minor child	- Rs 1,500
Net amount added to the parent	Rs 40,000 - Rs 1,500	Rs 38,500
Which parent	Kavita has Rs 12,00,000, more than Suresh's Rs 9,00,000 (section 99(5)(b)(i))	Kavita
Kavita's total income after inclusion	Rs 12,00,000 + Rs 38,500	Rs 12,38,500

Assumption: Aarav has no disability of the kind in section 154. Whether the Rs 90,000 itself needs a return for Aarav depends on other rules not covered here.

What happens if the transferred asset goes into a business or firm?

Section 99(2) covers a spouse or son's wife who invests an asset received from you in a business or as capital in a firm (or to be admitted to partnership benefits). Then not all of the business or firm income is clubbed. The Act gives a formula that compares the value of the asset invested (C) with the total investment or capital (D) as on the first day of the tax year, applied to the income and interest from the business or firm (B). The formula picture is not reproduced in the text we use, so read the exact computation in section 99(2) before using it for a client.

Is any part of the child's clubbed income exempt?

Yes. Under section 11 read with Schedule III, Sl. No. 17, the income clubbed under section 99(1)(c) is excluded from the parent's total income up to Rs 1,500 for each minor child whose income is clubbed. With two such children the limit is Rs 1,500 each, Rs 3,000 in all. Example B shows the working.

What about a house given to a spouse or minor child?

Section 25(a) says that, for house property income (sections 20 to 24), the "owner" includes an individual who transfers a property without adequate consideration to the spouse (except under an agreement to live apart) or to a minor child (other than a married daughter). So the house property income is taxed as yours. Note the wording: a married minor daughter is excluded from this owner rule.

What if you convert your property into HUF property?

Section 99(3) applies when you convert separate property into property of the HUF you belong to, by impressing it with the family character, throwing it into the common stock, or transferring it to the family, without adequate consideration. The income from that property is treated as your income, and the income received by your spouse on a partition of that property is treated as arising from assets you transferred to her. The income is then excluded from the HUF's or the spouse's total income. Section 99(4) says this does not apply to conversions made on or before 31 December 1969.

Who pays the tax on clubbed income? Section 100

Section 100 deals with recovery. Where income of a person other than you, from an asset or from membership of a firm, is included in your total income under this Chapter or under section 25(a):

• the person in whose name the asset stands, or who is a firm member, is liable to pay the part of your tax attributable to that income, after the Assessing Officer serves a notice of demand on them;
• where an asset is held jointly, the holders are jointly and severally liable; and
• the provisions of Chapter XIX-D apply accordingly.

In Example A, if Ravi did not pay the tax on the Rs 70,000, the department could issue a demand to Meena for the share of Ravi's tax attributable to it.

Real-life scenarios

Neha and the family business. Neha holds 30% of the profits of a trading firm run by her brother. Her husband Arjun draws Rs 4,00,000 a year as a "consultant" to the firm and has no particular qualification for the work. Neha has a substantial interest (20% or more of profits), and Arjun's pay is remuneration from that concern, not income solely from professional skill. It is clubbed with the income of whichever of Neha and Arjun has the greater total income before inclusion. If Arjun were a qualified software engineer paid for that expertise, the carve-out in section 99(1)(a)(i) would be examined.

Dev and his daughter-in-law. Dev gifts Rs 5,00,000 to his son's wife, Isha, who invests it in mutual funds. The income from that gift is clubbed in Dev's hands under section 99(1)(b). Isha's own salary and the savings she built from it stay with her.

What are the common mistakes with clubbing of income?

• Treating a gift to a spouse as a tax shift. Income from gifted assets comes back to the giver under section 99(1)(a)(ii).
• Forgetting the child's own earnings are excluded. Work, skill and talent income of a minor, and income of a child with a section 154 disability, is not clubbed.
• Choosing the wrong parent. The parent with the higher total income before inclusion is taxed, not the one who opened the account. Compare total incomes before adding the child's income.
• Switching parents each year. Section 99(5)(b) generally keeps it with the same parent in later years unless the Assessing Officer is satisfied otherwise.
• Ignoring loss. Section 99(5)(d) treats "income" as including loss, so a clubbed loss reaches the giver too.
• Overlooking house property. A flat transferred to a spouse for no consideration makes the transferor the owner for sections 20 to 24 under section 25(a).

Where is this in the Act?

• Section 99(1): clubbing for spouse, son's wife, minor child, and indirect transfers.
• Section 99(2): asset invested in a business or firm by the spouse or son's wife.
• Section 99(3) and (4): conversion of property into HUF property.
• Schedule III, Sl. No. 17 (section 11): Rs 1,500 per minor child exclusion for income clubbed under section 99(1)(c).
• Section 99(5): substantial interest, which spouse or parent is taxed, meaning of "property" and "income".
• Section 100: liability of the other person for tax on clubbed income.
• Section 25(a): owner of house property includes the transferor to spouse or minor child.
• Section 154 and section 127: disability deduction and the meaning of disability for the child exception.
• Rule 213(5): for a lower-deduction certificate on dividends (Form 128), the shares must be in public companies, in the applicant's name and beneficially owned, with the dividends not includible in another person's total income under sections 96 to 99.

How can CA firms keep track of clubbing across a family?

Clubbing issues usually surface when a family's returns are filed by different people, or across years. Finexo's practice management software lets a CA firm keep the related clients, assignments and working notes for a family in one place so the same transfers are not missed from one return to the next. It does not compute tax or decide the treatment for you.

If you are also looking at TDS in the same client file, see our guide to TDS on rent under the Income-tax Act, 2025.

This article explains the Income-tax Act, 2025 (as amended by the Finance Act, 2026). It is general information, not tax advice. Confirm the position for a specific case with a qualified chartered accountant.