Section 99 · Other persons' income
Section 99 of the Income-tax Act, 2025 — Clubbing of Income of Spouse, Minor Child and Others
By CA Rajat Agrawal
Updated 04 Jul 2026
Chapter V
📜 What the law says — Section 99, Income-tax Act 2025
99. (1) The total income of any individual, for a tax year, shall include the income
arising directly or indirectly,—
(a) to the spouse of such individual,—
(i) by way of salary, commission, fees or any other form of remu-
neration, whether in cash or kind, from a concern in which such
individual has a substantial interest but shall not include income
solely attributable to the application of technical or professional
knowledge, experience and technical or professional qualification
of the spouse;
(ii) from assets transferred directly or indirectly to him or her by such
individual otherwise than for adequate consideration or in connec-
tion with an agreement to live apart, subject to the provisions of
section 25(a);
(b) to the son’s wife of such individual from assets transferred directly or
indirectly on or after the 1st June, 1973, to her by such individual, oth-
erwise than for adequate consideration;
(c) to the minor child of the such individual, but shall not include income
accruing or arising—
(i) on account of work done by such child; or
(ii) from activities where his skill, talent, specialised knowledge or
experience is applied; or
(iii) where such minor child is suffering from disability of the nature
specified in section 154;
(d) to any person or association of persons from assets transferred directly
or indirectly, otherwise than for adequate consideration to the person
or association of persons by such individual, to the extent to which the
income from such assets is for the immediate or deferred benefit of his
or her spouse or his son’s wife, as the case may be, other than the assets
transferred before 1st June 1973, to the extent to which the income from
such assets is for the immediate or deferred benefit of his son’s wife.
(2) If the asset transferred under 11[sub-section (1)(a)(ii) or (b)] is invested by the
spouse or son’s wife, in any business or in the nature of capital contributed as a
11. Substituted for “sub-section (1)(a)(i) or (b)” by the Finance Act, 2026, w.e.f. 1-4-2026.
partner in a firm, or, as the case may be, for being admitted to the benefits of part-
In plain language
What Section 99 actually says
Section 99 of the Income-tax Act, 2025 is the "clubbing of income" provision. It replaces the well-known Section 64 of the Income-tax Act, 1961, and carries forward the same rules with only renumbering and simpler language. The core idea is simple: if you try to shift income to a family member in a lower tax bracket — your spouse, your minor child or your son's wife — by gifting them assets or routing salary to them, the law "clubs" that income back into your total income and taxes it in your hands.
This is an anti-avoidance rule. It stops a taxpayer from artificially splitting one income across several family members to escape higher slab rates.
Who and what it covers
- Spouse's remuneration: If you have a substantial interest in a concern (company, firm, etc.) and your spouse gets salary, commission, fees or any remuneration from that concern, it is clubbed with your income. Exception: if the spouse holds genuine technical or professional qualifications and the pay is attributable to that expertise, it is NOT clubbed.
- Income from assets gifted to spouse: Income from any asset you transfer to your spouse without adequate consideration (i.e. a gift or an underpriced sale) is clubbed with you. Transfers under an agreement to live apart are excluded.
- Income from assets gifted to son's wife (daughter-in-law): Income from assets transferred to your son's wife without adequate consideration (on or after 1 June 1973) is clubbed with you.
- Minor child's income: Almost all income of a minor child (below 18) is clubbed with the parent whose total income is higher.
- Indirect / cross transfers: If you transfer assets to any other person for the benefit of your spouse or son's wife, the income is still clubbed with you.
"Substantial interest" — the 20% test
A person is said to have a substantial interest in a concern if they beneficially hold, at any time during the year:
- 20% or more of the voting power (in the case of a company), or
- 20% or more of the profits (in the case of a firm or any other concern).
Holdings of the individual and relatives are aggregated to test this threshold.
Minor child — key conditions and reliefs
- Which parent? The minor's income is clubbed with the parent whose income (before clubbing) is higher. If the parents' marriage does not subsist, it is clubbed with the parent who maintains the child. Once income is clubbed with one parent, it continues with that parent unless the Assessing Officer is satisfied otherwise.
- Skill / manual work exception: Income a minor earns from their own manual work, skill, talent, specialised knowledge or experience (e.g. acting, sports, painting) is NOT clubbed — it is taxed as the child's own income.
- Disabled minor: Income of a minor with a disability qualifying under the disability provisions (Section 154 of the 2025 Act, corresponding to Section 80U) is not clubbed at all.
- ₹1,500 exemption: Where a minor's income is clubbed, the parent may claim an exemption of ₹1,500 per minor child (or the actual clubbed income, whichever is less), under the corresponding exemption provision to old Section 10(32).
How the clubbing is measured — the accretion rule
An important, taxpayer-friendly point: only the income directly from the transferred asset is clubbed. Income earned on that clubbed income (accretion / second-generation income) is NOT clubbed — it belongs to the recipient. For example, interest on an FD funded by a gift to your spouse is clubbed with you, but if the spouse reinvests that interest and earns further income, the further income is taxed in the spouse's hands.
Practical implications
- Gifting cash to a homemaker spouse does not save tax on the income the money generates — it comes back to you.
- A better route is gifting to major children or parents, who are outside Section 99's spouse/minor-child net.
- Investing a minor's clubbed money in tax-free instruments, or in the child's own skill-based earnings, avoids the clubbing hit.
- Salary to a spouse in your business must be backed by real qualifications and genuine work to survive scrutiny.
💡 Example
Example 1 — Gift to spouse. Mr. Rahul gifts ₹8,00,000 to his homemaker wife, who puts it in a fixed deposit earning 7% — that is ₹56,000 of interest a year. Because the money was transferred without adequate consideration, the entire ₹56,000 is clubbed and taxed in Rahul's hands, not his wife's. If Rahul is in the 30% slab, this adds roughly ₹16,800 (plus cess) to his tax. If his wife later reinvests that ₹56,000 and earns further interest, that further interest is taxed in her hands (accretion rule).
Example 2 — Minor child's FD and a talent win. Ms. Meena (income ₹12,00,000) and her husband (income ₹9,00,000) have a 10-year-old daughter. The daughter earns ₹40,000 interest on a gifted FD and separately wins ₹1,00,000 in a national painting competition. The ₹40,000 FD interest is clubbed with Meena (the higher earner), reduced by the ₹1,500 exemption, so ₹38,500 is added to Meena's income. The ₹1,00,000 painting prize is from the child's own talent and is NOT clubbed — it is taxed as the child's own income.
A relatable story. Suresh, a business owner with a 60% stake in his firm, put his wife on the payroll at ₹50,000 a month "to save tax," even though she rarely visited the office and had no professional qualification. During assessment, the officer invoked Section 99: because Suresh had a substantial interest and the salary was not backed by any technical or professional skill, the entire ₹6,00,000 was clubbed back into Suresh's income. What looked like a clever split ended up taxed at his top slab — a reminder that clubbing rules quietly undo most family income-shifting.
| Situation | Whose income is clubbed | Clubbed with whom | Key exception / relief |
|---|
| Spouse's remuneration from a concern where you have substantial interest | Spouse's salary/commission/fees | The individual (you) | Not clubbed if spouse has genuine technical/professional qualification |
| Asset gifted to spouse (no adequate consideration) | Income from that asset | Transferor spouse | Excluded if under an agreement to live apart; accretion not clubbed |
| Asset gifted to son's wife (on/after 1 Jun 1973) | Income from that asset | Transferor (father/mother-in-law) | Only if without adequate consideration |
| Minor child's income | Child's income (FD interest, dividend, rent, etc.) | Parent with higher income | ₹1,500 per child exemption; skill/talent income & disabled minor not clubbed |
| Property converted into HUF property (no adequate consideration) | Income from converted property | The individual | Deemed transfer; income remains attributable to you |
| "Substantial interest" threshold | — | — | 20% voting power (company) or 20% profit share (firm/other) |
Related sections
Section 64 of the 1961 Act — the predecessor clubbing provision Section 154 — deduction for a person with disability (basis for disabled-minor exclusion) Section 98 — income from revocable transfer of assets clubbed with transferor Section 92 — transfer of income where there is no transfer of the asset Section 12 — incomes not included in total income (exemptions, incl. minor-child ₹1,500 relief) Section 100 — liability of transferee for tax on clubbed income
Frequently asked questions
Does Section 99 apply if I gift money to my wife?
Yes. Any income earned from money or assets gifted to your spouse without adequate consideration is clubbed back into your income and taxed at your slab rate. Only the further income earned on that income (accretion) escapes clubbing.
Is all of my minor child's income clubbed with mine?
Almost all of it is clubbed with the parent who earns more. The main exceptions are income the child earns from their own skill, talent or manual work, and the income of a disabled minor, which are not clubbed.
How much minor-child exemption can I claim?
You can claim ₹1,500 per minor child, or the actual income clubbed for that child, whichever is lower. This relief mirrors the old Section 10(32) benefit.
My spouse works in my company — will the salary be clubbed?
If you hold a substantial interest (20% or more voting power or profit share) and the salary is not backed by your spouse's genuine technical or professional qualifications, the salary is clubbed with your income. Real, qualification-based remuneration is not clubbed.
What is 'substantial interest' under Section 99?
You have a substantial interest if you (with relatives) beneficially hold 20% or more of the voting power in a company, or are entitled to 20% or more of the profits in a firm or other concern, at any time during the year.
Can I avoid clubbing by gifting to my adult son or my parents?
Yes. Section 99 targets spouse, minor child and son's wife. Gifts to a major (adult) child or to your parents are outside these clauses, so income from such gifts is taxed in the recipient's hands, not yours.
Is Section 99 different from the old Section 64?
In substance, no. Section 99 of the Income-tax Act, 2025 re-enacts Section 64 of the 1961 Act with clearer drafting and renumbering. The 20% threshold, ₹1,500 exemption and all key exceptions remain the same.
C
CA Rajat Agrawal
Chartered Accountant, EaseValue · Reviewed 04 Jul 2026
This explainer is prepared and reviewed by EaseValue's tax team, based on the text of the Income-tax Act, 2025 (as amended by the Finance Act, 2026).
Disclaimer: This page explains the law in general terms for education and is not professional advice. The Income-tax Act, 2025 takes effect from 1 April 2026; provisions, thresholds and interpretations may change. Please confirm your specific position with our team before acting.
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