Apportionment of Income Between Spouses Under Portuguese Civil Code: A Comparative Analysis of Income Tax Provisions

Clause 10 Apportionment of income between spouses governed by Portuguese Civil Code.

Income Tax Bill, 2025

Introduction

The taxation of income between spouses in Goa, Dadra and Nagar Haveli, and Daman and Diu presents unique considerations due to the continued application of the Portuguese Civil Code of 1860. This article analyzes the provisions relating to the apportionment of income between spouses under both Section 5A of the Income-tax Act, 1961, and Clause 10 of the proposed Income Tax Bill, 2025.

Historical Context and Legislative Intent

The Portuguese Civil Code introduced the concept of "COMMUNIAO DOS BENS" (community of property) in these territories, which continues to influence personal laws and taxation. Section 5A was inserted in the Income-tax Act, 1961, through the Finance Act, 1994, with retrospective effect from April 1, 1963, to address the specific needs of couples governed by this system.

Detailed Analysis of Key Provisions

1. Treatment of Community Property

Both provisions explicitly state that the income of spouses shall not be assessed as community property. This represents a departure from treating such income as that of an association of persons or body of individuals u/s 5A(1) of the 1961 Act. Clause 10(a) of the 2025 Bill maintains this position but with simplified language.

2. Income Apportionment Rules

The provisions establish similar principles for income apportionment:

a) General Rule:

• Both laws mandate equal division of income between spouses under all heads except "Salaries"
• The apportioned income is to be included separately in each spouse's total income

b) Salary Income:

• Special treatment for salary income remains consistent
• Attribution to the earning spouse exclusively
• Direct inclusion in the total income of the earning spouse

3. Key Differences and Evolution

Structural Changes:

• The 2025 Bill presents a more organized format with clear sub-clauses
• Language simplification while maintaining the core principles
• Removal of explicit references to "association of persons" or "body of individuals"

Practical Implications

1. Tax Assessment Impact

• Individual assessment of spouses maintained
• Equal division of non-salary income ensures tax equity
• Clear demarcation of salary income attribution

2. Compliance Requirements

• Separate filing requirements for each spouse
• Need for proper income segregation and documentation
• Special considerations for mixed income sources

Comparative Analysis with Other Jurisdictions

The provisions represent a unique approach to spousal income taxation, different from:

• Standard individual taxation in other parts of India
• Joint assessment systems in some countries
• Community property rules in other civil law jurisdictions

Conclusion

The proposed Clause 10 maintains the fundamental principles established in Section 5A while offering clearer structure and simplified language. This continuity ensures stability in the taxation framework for couples governed by the Portuguese Civil Code while potentially improving implementation clarity.

Full Text:

Clause 10 Apportionmet of income between spouses governed by Portuguese Civil Code.

Dated: 25-2-2025