Clubbing of Income Between Spouse

This query is : Resolved

Quick Summary

Under Section 64(1)(iv) of the Income Tax Act, income arising from assets gifted to a spouse is generally clubbed with the transferor's income. Merely changing the form of the asset multiple times does not clearly avoid clubbing provisions, and there is no strong supporting case law confirming such a tax planning method.

Vikas Sharma

Vikas Sharma (Querist)
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05 May 2026 If I transfer some funds to my spouse, and if the spouse invests it in some way, then the return is still taxable in my hands. However, I have been told that if that fund changes the shape and form twice, then after that clubbing would not apply. Can someone confirm if this is correct and which section of Income Tax Act supports this?

And also in what way can this be executed - for example if using the demat account, buying and selling publicly listed shares twice within few days can achieve this? Or does it need to be more complex, for example buying something physical like gold, then silver and then bringing it back in cash form?

I am looking to do this to distribute funds equally between me and spouse with a goal to get maximum benefit of tax free allowances for an individual.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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05 May 2026 Clubbing Rule: Income from gifted assets to a spouse is taxed in your hands under Section 64(1)(iv).

Misconception: Changing the "shape and form" of the asset does not legally stop the clubbing provisions from applying.

TDS/Tax Impact: The goal of utilizing a spouse's tax-free limits through gifting is difficult to achieve legally because the income will likely be attributed back to you.

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Vikas Sharma

Vikas Sharma (Querist)
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09 May 2026 Thanks a lot Aashok for the reply. The reason I asked this question was this instagram reel from a CA. Hopefully it will correctly open up at your end.

https://www.instagram.com/reel/DYBxZomN5hP/?utm_source=ig_web_copy_link&igsh=MzRlODBiNWFlZA==

This reel suggested that there is a way to avoid clubbing provision. And the CA has put a detailed guide in his story which I could not find. And looking at the comments, many others could not find either.

Vikas Sharma

Vikas Sharma (Querist)
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09 May 2026 Adding a comment only to try and reopen the status of the query.