Generally an assessee is taxed in respect of his own income. But sometimes in some exceptional circumstances this basic principle is deviated and the assessee may be taxed in respect of income which legally belongs to somebody else.
Earlier the taxpayers made an attempt to reduce their tax liability by transferring their assets in favour of their family members or by arranging their sources of income in such a way that tax incidence falls on others, whereas benefits of income is derived by them. So, to counteract such tax avoidance, necessary provisions have been incorporated in the Income tax Act, 1961. Hence, a person is liable to pay tax on his own income as well as income belonging to others on fulfillment of certain conditions.
Income from assets transferred to son’s wife attracts the provisions of section 64 (1) (vi) as per conditions below:-
• The taxpayer is an individual.
• He/she has transferred an asset after May 31, 1973.
• The asset is transferred to son’s wife.
• The asset is transferred without adequate consideration.
In the case of such individuals, the income from the asset is included in the income of the taxpayer who has transferred the asset.
Reference: – As Per Section 64(1) (VI) of the Income Tax Act 1961
Income of individual to include income of spouse, minor child,etc.
64. (1) in computing the total income of any individual, there shall be included all such income as arises directly or indirectly—
(vi) To the son’s wife, of such individual, from assets transferred directly or indirectly on or after the 1st day of June, 1973, to the son’s wife by such individual otherwise than for adequate consideration