Section 99 — Income of individual to include income of spouse, minor child, etc. Successor to s.64 of the 1961 Act.
Section 99 is in Chapter V — Income of Other Persons Included in Total Income of Assessee, which runs from section 96 to section 100.
Sub-section (1) lists four classes of income included in an individual's total income though they arise to someone else. Clause (a) covers a spouse: remuneration from a concern in which the individual has a substantial interest, excluding income solely attributable to the application of the spouse's technical or professional knowledge, experience and qualification; and income from assets transferred to the spouse otherwise than for adequate consideration or in connection with an agreement to live apart, subject to section 25(a). Clause (b) covers the son's wife, for assets transferred to her on or after 1 June 1973 otherwise than for adequate consideration. Clause (c) covers a minor child, excluding income from work done by the child, from activities applying his skill, talent, specialised knowledge or experience, and income of a minor child with a disability of the nature specified in section 154. Clause (d) covers income of any person or association from assets transferred to them otherwise than for adequate consideration, to the extent it is for the immediate or deferred benefit of the spouse or son's wife.
Sub-section (2) applies where the asset transferred under sub-section (1)(a)(ii) or (b) — those words substituted by Act No. 4 of 2026 with effect from 1 April 2026 for "sub-section (1)(a)(i) or (b)" — is invested by the spouse or son's wife in a business, or as capital in a firm, or for admission to the benefits of partnership. It states the includible amount as a formula in four terms: A is the income to be included in the individual's hands; B is the income and interest arising to the spouse or son's wife from the business or firm during the tax year; C is the value of the assets invested or contributed as capital as on the first day of the tax year; and D is the total investment or capital contribution as on that day.
Sub-section (3) deals with conversion of an individual's separate property into property of his Hindu undivided family without adequate consideration. The individual is deemed to have transferred it through the family to its members and the income from it is deemed to be his; and where the converted property has been partitioned, income from so much of it as the spouse receives is deemed to arise to her from assets transferred indirectly, so that sub-section (1)(a) applies. Income so included is excluded from the family's or spouse's total income. Sub-section (4) shuts sub-section (3) out where the conversion took place on or before 31 December 1969.
Sub-section (5) supplies the working rules. For clause (1)(a)(i), the remuneration goes to whichever spouse has the greater total income before inclusion, and once included it is not to be included in the other spouse's income for a succeeding year unless the Assessing Officer is so satisfied after giving that spouse a hearing; substantial interest means beneficial ownership, alone or jointly with relatives, of shares carrying not less than 20% of the voting power (excluding fixed-dividend shares), or entitlement to at least 20% of the profits, at any time during the tax year. For clause (1)(c), a minor's income goes to the parent with the greater total income where the marriage subsists, and to the parent who maintains the child where it does not, with the same one-way rule and hearing requirement. Clause (5)(d) provides that "income" includes loss.
An individual can move an income source into the hands of a spouse, a son's wife, a minor child or a family without giving up the benefit of it, and progressive rates would reward every such move. The section restores the income to the person who parted with the asset or who controls the concern, tracing benefit rather than legal title. The exceptions — professional remuneration, a minor's own earnings, an agreement to live apart, adequate consideration — mark out the transfers that are genuine rather than rate-driven.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Substantial interest in a company | Not less than 20% of the voting power | Shares, not being shares entitled to a fixed rate of dividend whether or not with a further right to participate in profits, owned beneficially by the individual alone or jointly with one or more relatives at any time during the tax year | Sub-section (5)(a)(iii)(A) |
| Substantial interest in a concern other than a company | At least 20% of the profits | Entitlement of the person alone, or of that person and one or more relatives jointly, at any time during the tax year | Sub-section (5)(a)(iii)(B) |
| Cut-off date for transfers to a son's wife | 1st June, 1973 | Clause (b) covers assets transferred on or after that date; under clause (d) assets transferred before that date are excluded so far as the benefit is for the son's wife | Sub-section (1)(b) and (1)(d) |
| Cut-off date for conversion of separate property into family property | 31st December, 1969 | Sub-section (3) does not apply where the conversion took place on or before that date | Sub-section (4) |
Clause (a)(i) and clause (a)(ii) are different rules and the exceptions are not interchangeable: the professional-skill exception protects only remuneration from a concern, and the living-apart and adequate-consideration exceptions protect only the asset-transfer limb. The 20% test is satisfied if met at any time during the year and counts relatives' holdings jointly, so a small personal shareholding is not the answer to it. Once an amount is included in one spouse's or parent's hands, sub-section (5)(a)(ii) and (5)(b) stop it being moved for succeeding years unless the Assessing Officer is satisfied after hearing that other person — the switch is not automatic when incomes change. Sub-section (2) taxes only the part of the business or firm income the transferred asset supports, because C and D are both struck as on the first day of the tax year. And because clause (5)(d) says income includes loss, the clubbing rules bring a loss home just as they bring a profit.
An individual owns shares carrying 25% of the voting power in a company and his spouse, without a relevant professional qualification, is paid Rs. 12 lakh a year by it. That Rs. 12 lakh is clubbed with whichever spouse has the greater total income before inclusion. Separately he gifts her Rs. 20 lakh, which she puts into a firm where her total capital on the first day of the tax year is Rs. 50 lakh and from which she earns Rs. 10 lakh. Sub-section (2) works on those terms — B is Rs. 10 lakh, C Rs. 20 lakh, D Rs. 50 lakh — so only the part referable to the transferred Rs. 20 lakh is clubbed, not the whole Rs. 10 lakh.
It appears as an addition in a scrutiny assessment clubbing a spouse's salary, a minor's interest income or income from a gifted asset, and it is the section behind the schedule in the return reporting income of a spouse or minor child. The hearing rights in sub-section (5) are exercised before the Assessing Officer when he proposes to shift the inclusion.
but shall not include income solely attributable to the application of technical or professional knowledge, experience and technical or professional qualification of the spouse
for this section, "income" includes loss
See the full 1961 to 2025 concordance.
See every circular and notification on this section, or the circulars index.
See every circular and notification on this section, or the notifications index.
