The remuneration received by the spouse from a concern in which the individual has a substantial interest is clubbed with the income of the latter. However, if the remuneration is received by the spouse on application of technical or professional knowledge or experience, the clubbing of income will not take place.
For example, Ms A has a substantial interest in XYZ and her husband, Mr A, is employed by XYZ without any technical or professional qualification. In this case, the salary income of Mr A will be included in the income of Ms A.
Also, the income of the spouse arising from an asset transferred by the individual for inadequate consideration is clubbed with the income of the individual. However, such clubbing will not be done if the asset is transferred in connection with an agreement to live apart. The income from transferred assets will be clubbed even if the assets are routed by the individual through any other person or association of persons for the immediate or deferred benefit of the spouse.
For example, Ms A transfers 8% interest bonds without consideration to an association of persons, subject to the condition that the interest income from these bonds will be utilised for the benefit of her husband, Mr A. Interest from bonds will be included in the income of Ms A. Similar provisions are applicable in the case of transfer of income by a daughter-in-law.
Any income that arises to a minor child will be clubbed with the income of the parent whose total income is higher than the other parent subject to a deduction of R1,500 per child. If the marriage of the parents does not subsist, it will be clubbed with the income of the parent who maintains the child. However, income earned by the minor child suffering from a specified disability, or on account of manual work, or involving application of his skills or talent, will not be clubbed.
For example, Ms A opens a fixed deposit in the name of her minor son. The interest income from such a deposit will be included in the income of Ms A. However, if the minor child receives payment from an entertainment company for a stage show due to his singing talent, such income will not be included in the income of Ms A.
The writer is senior tax professional, Ernst & Young. Views expressed are personal