Clubbing Income, Diluting Autonomy? A Doctrinal And Policy Review Of Section 64 Of The Income Tax Act, 1961
- IJLLR Journal
- 7 days ago
- 1 min read
Vaishali Singh, NALSAR University of Law, Hyderabad
Introduction
Tax laws are designed not only to generate revenue but also to uphold the principles of equity and fairness in financial contributions to the state. However, individuals often seek ways to minimize their tax liabilities, and one such method is income splitting i.e. transferring income or assets to family members in lower tax brackets to reduce the overall tax burden. To curb this practice, Section 64 of the Income Tax Act, 1961, introduces the concept of clubbing of income, ensuring that income legally transferred to a spouse, minor child, or certain relatives is still taxed in the hands of the transferor. The provision plays a significant role in tax administration by preventing taxpayers from shifting income to their spouses, minor children, or specific relatives to take advantage of lower tax slabs. However, its application also raises practical challenges, particularly in cases involving genuine financial transfers, evolving family structures, and new forms of income generation, such as digital assets and investments in start- ups.
This study aims to conduct a comprehensive review and analysis of Section 64 of the Income Tax Act, 1961, focusing on its effectiveness, fairness, and relevance in the modern tax framework. It will also explore practical challenges faced by taxpayers and tax authorities in applying the clubbing provisions, particularly in light of changing family structures, digital income sources, and evolving tax planning strategies. By comparing India’s approach with international taxation models, the study will also evaluate whether reforms are necessary to align Section 64 with global best practices.
