tax assessment

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

16 November 2009 i am an employee of psu. my assessment came for scrutiny for the FY2007-08. In that year i got 3 lakh profit from share trading in my account and 2.5 laksh loss from share trading in my wife account(she has seperate pan no. and house wife and never submitted return). Both of these are short term. I did not show any of these in my returns.

Now i must disclose my 3 lakh profit. So can i add my wife's loss to this? Bcoz my wife has no other source of income and its actually my money and my loss and i did it.

please clarify.

Thanks in advance

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
Follow

16 November 2009 If the conditions as in section 64(1)(iv) is satisfied, wife's loss can be included in husbands income.
But if the husband declares his as well as wife's income after receipts of notice under section 143(2), penalty provisions under section 271(1)(c) may attract.

hshivakumar

hshivakumar (Expert)
Follow

16 November 2009 you cannot set off your Trading loss your wife trading profit.

Querist : Anonymous

Querist : Anonymous (Querist)

16 November 2009 thanks both of you. But which one is correct.

And chakrapaniji, what are the satisfaction conditions in section 64(1)(iv)? My wife has no income, it was my money (i can prove with statements) and i traded in my wife account. Are these sufficient?

one more doubt, shall i say that i traded in my wife's account or shall i say i gave money to my wife and she traded.

is there any other way so that i can club these to and got penalised for less amount?

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
Follow

26 July 2025 Great question! Here's a detailed explanation to help you navigate this:

### Section 64(1)(iv) – Clubbing of Income from Spouse:

This section allows the **income of a spouse to be included in the assessee’s income** if the income arises from assets transferred without adequate consideration. The idea is to prevent tax evasion by transferring income-producing assets to a spouse.

---

### Key Points for Your Case:

1. **Trading done in your wife's account with your money**:
If you provided the money to your wife (without consideration), and the profits/losses arise from this money, the income or loss may be clubbed in your hands.

2. **Loss set-off**:

* Profits and losses can only be set off if they belong to the **same person** in the same assessment year.
* You cannot directly set off your wife’s loss against your profit **unless** clubbing provisions apply, i.e., income from assets transferred to spouse is taxed in your hands.

3. **To claim clubbing**:

* You need to prove that money invested in your wife's account was originally yours and transferred without consideration.
* Then, under Section 64(1)(iv), the income arising from such transfer (profit or loss) will be taxed in your hands.

4. **Disclosing after notice under section 143(2)**:

* If you add the income and disclose it after receiving a notice, penalty under section 271(1)(c) can be imposed for concealment or under-reporting of income.
* However, genuine cases with full disclosure might be eligible for penalty waiver or reduction.

---

### What should you do?

* **Disclose the profit of ₹3 lakh** in your return voluntarily to avoid penalty or at least show willingness to comply.
* Regarding your wife's loss:

* You can claim clubbing only if you prove the amount invested was yours and transferred without consideration.
* You should mention this clearly in your return or during assessment proceedings.
* Whether to say **“I traded in my wife’s account”** or **“I gave her money and she traded”** —
Legally, the second statement aligns with clubbing provisions, because the source of money matters.

---

### Important:

* Your wife's account is separate with a separate PAN, so her income and losses are separate unless clubbing applies.
* Losses of your wife cannot be set off against your income if clubbing doesn’t apply.
* Consult a tax professional to draft a proper explanation and file a revised return or respond to the scrutiny notice.

---

If you want, I can help you draft the letter for your response or guide you on how to disclose this properly.

Would you like assistance with that?

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now