suppose , Mr A has business and he provides salary to his wife as a staff member but actually his wife doesn't have any technical or professional qualifications...salary amount is 20000
now, clubbing provision attracts as per income tax act...
but my question is what is accounting treatment??
in the books of Mr A...
salary account dr 20000
to bank account 20000
in the books of Mrs A...
Bank account dr 20000
to salary income 20000
but this 20000 will be clubbed in the hands of Mr A as per IT act and he will be liable for tax...
above entry and its effect as per IT is correct????
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Accounting in case of clubbing
Replies (4)
Quick Summary
Clubbing provisions are not applicable in this case as there's no transfer of asset by husband to wife. husband is paying salary to wife for adequate considerations so clubbing not applicable.
in this case A will get the deduction of salary paid to his wife.
and in wife's hand the entire salary would be tax free as it's below exemption limit.
in this case A will get the deduction of salary paid to his wife.
and in wife's hand the entire salary would be tax free as it's below exemption limit.
Ok....got it...
but if husband transfers asset to his wife otherwise than adequate consideration and wife receives rent income then what is the accounting entries in husband and wife books of account???
but if husband transfers asset to his wife otherwise than adequate consideration and wife receives rent income then what is the accounting entries in husband and wife books of account???
As per Section 64 (1)(ii), since the wife does not possess technical/professional qualifications, clubbing provision will be applicable.
As per Section 40(A)(2)(b), any expenses which the Assessing Officer feels is unreasonable (in present case, since wife does not possess technical/professional qualifications) can be disallowed.
It is advisable to disallow the same under section 40(A)(2)(b) in ITR and 'disclose' the same in Schedule SPI of ITR. This is my humble opinion.
As per Section 40(A)(2)(b), any expenses which the Assessing Officer feels is unreasonable (in present case, since wife does not possess technical/professional qualifications) can be disallowed.
It is advisable to disallow the same under section 40(A)(2)(b) in ITR and 'disclose' the same in Schedule SPI of ITR. This is my humble opinion.
Yes...thanks to both of you...
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