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TMI BlogPrevent tax evasion through the diversion of income to family members "clubbing of income" in Clause 99 of the Income Tax Bill, 2025 vs. Section 64 of the Income Tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 64 of the Income Tax Act, 1961. Understanding and analyzing these provisions is crucial, as they have significant implications for taxpayers, particularly those with substantial family wealth or business interests. Objective and Purpose The primary objective of Clause 99 in the Income Tax Bill, 2025, is to prevent tax evasion through the diversion of income to family members in lower tax brackets. By including the income of spouses, minor children, and other specified individuals in the total income of the assessee, the provision seeks to ensure a fair and equitable tax system. This legislative intent mirrors that of Section 64 of the Income Tax Act, 1961, which was designed to curb tax avoidance strategies that exploit familial re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Income of Minor Child: - Clause 99(1)(c) includes the income of a minor child, except where the income arises from manual work or the application of the child's skill or talent. This is consistent with Section 64(1A) of the 1961 Act, which similarly excludes income from the child's personal efforts. 5. Investment of Transferred Assets: - Clause 99(2) provides a formula to calculate the income to be included when transferred assets are invested in a business or partnership. This is similar to Explanation 3 of Section 64, ensuring that income from such investments is appropriately attributed to the individual. 6. Conversion of Property to HUF: - Clause 99(3) addresses the conversion of individual property to Hindu Undivided Fam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al professional earnings. 3. Asset Transfers: - Both laws address asset transfers to spouses and the son's wife, ensuring that such transfers for tax avoidance are captured and taxed appropriately. 4. Income of Minor Children: - The provisions for including a minor child's income are consistent, with exceptions for income from the child's personal efforts. Conclusion Clause 99 of the Income Tax Bill, 2025, and Section 64 of the Income Tax Act, 1961, are pivotal in ensuring that the tax system remains equitable by addressing potential loopholes in income diversion within families. While the 2025 Bill builds on the foundation laid by the 1961 Act, it introduces refinements that may enhance clarity and compliance. Taxpayers m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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