• Clubbing of losses

Dear Sir,

I earned 80 lakhs rs from share trading (derivatives) and my mother earned 70 lakhs this year.

We transfered  1.5 crore rupees into my wife account and 30 lakhs in my aunt's account (my mother's sister).
My wife incurred a loss of 1.5 crore and my aunt faced loss of 30 lakhs.

We not only loose what we earned this year but also income earned previous years(Tax paid).
How these losses will be clubbed to sett off the gains made this year and to be carried forward in future.

Thanks & Regards
Asked 4 months ago in Income Tax from New Delhi, Delhi
Hi

Such clubbing and set off is not possible. And taxes have to be paid by you and your mother this year.

However, clubbing could be possible between you and your wife. How your wife had been earning? Was it your money which was invested in her name??
Lakshita Bhandari
CA, Mumbai
1478 Answers
40 Consultations

5.0 on 5.0

Hi,

A taxpayer can set off its own losses against his income. You can't set off losses of other taxpayers with your income.


Please feel free to call/ revert in case you need more clarity.

Thanks and regards
Abhishek Dugar
CA CS B.Com
Abhishek Dugar
CA, Mumbai
2942 Answers
125 Consultations

5.0 on 5.0

Income/losses of your wife can be clubbed to your income or your mother's income so much as it is attributable to the money transferred to her directly or indirectly respectively by you or your mother.
Lakshita Bhandari
CA, Mumbai
1478 Answers
40 Consultations

5.0 on 5.0

The gains and losses of one's transactions can only be set off against his transactions only and not with the transactions of others. However assuming, that your wife lost all the money that was transferred by you, clubbing of income can be done in your name. So yours and your mothers profits can be set off with your wife's losses.
so in this case there will be no tax liability.

However, please disclose all the transactions clearly so that there are no hassles later.

Hope this clarifies.

regards,
Nikhil.
Nikhil Khanna
CA, Mumbai
705 Answers
3 Consultations

5.0 on 5.0

Dear Sir,

Clubbing is allowed either in individual hands or where income of one clubbed with other person.

Thanks
Vivek Kumar Arora
CA, Delhi
866 Answers
16 Consultations

5.0 on 5.0

Yes, if it can be proved that the source of cash was your mothers, clubbing can be done.

If the income is clubbed in your hands, the audit will be required for your account. This is on the assumption that your wife has no source of income and the entire transactions have happened through the money you gave.

However if she too has her source of income and the transactions have happened through her money, then in that case audit will be required for both of you
Nikhil Khanna
CA, Mumbai
705 Answers
3 Consultations

5.0 on 5.0

Dear Sir,

1) Yours and your wife losses can be clubbed and shown as net loss in your ITR as the funds have been provided by you to your wife to do share trading. You will be required to get the books of accounts audited but there is a possibility that your wife will get the notice from the department. Please keep all the contract notes and ledger from the broker intact to substantiate in future.

2) What is the source of income of your mother?. Your mother and aunts losses  can't be clubbed. If your mother has independent income, her losses can;t be clubbed with you.

Thanks 
Vivek Kumar Arora
CA, Delhi
866 Answers
16 Consultations

5.0 on 5.0

Hi,

If the source of income for all the trading is yours income only, then all the clubbing shall be done in your account, irrespective of the fact from whose accounts all the trading was done.

Clubbing of income follows rules of source of income and beneficiary of transactions except in the case of minors, where parents/ guardians accounts are clubbed.

I hope the same is clear to you.

Regards,
Sunny Thakral
CA, Delhi
224 Answers
4 Consultations

5.0 on 5.0

Hi,

How have you declared the amounts transferred to your wife / mother's sister / mother? Is it a loan or gift, etc? 

You can club only yours and your wife's income in your hands. Your mother cannot club the loss of her sister. Further, clubbing may not be allowed by the assessing officer, unless you prove completely that it was your income which was traded in your wife's name. And once you start clubbing, you will have to club even in the years in which there is a profit earned by your wife.

A better position will be to show the profit / loss in each of your return and carry forward the losses and set it off against the future years of profit.

Regards,
Keerthiga Padmanabhan
M.Com., CA, LL.B
Keerthiga Padmanabhan
CA, Greater Mumbai
784 Answers
23 Consultations

5.0 on 5.0

Hello,

I will have to understand your entire chain of cash flows to assist you as to which income/ losses can be adjusted/ clubbed with each other and what amount has to be carried forward.

It is very difficult to understand the same with the details provided by you here.

Trust this clarifies your query. 

Feel free to call / get back in case of further clarifications. 

Thanking You. 

Regards,
Rohit R Sharma
BCOM, FCA, LLB, CERT. FAFP
Rohit R Sharma
CA, Mumbai
2104 Answers
91 Consultations

5.0 on 5.0

Such clubbing is not allowed.

If you both have earning sources on different name then both account will required to get audit done.
And in case you are transfering your earnings to her account then only u will require audit.

Further if she earns(ex interest income) from your transferred money then it will be clubbed in your income and will be taxed accordingly.
Swati Agrawal
CA, Indore
359 Answers

5.0 on 5.0

Audit would be required for both you and your wife irrespective of clubbing provisions.
Lakshita Bhandari
CA, Mumbai
1478 Answers
40 Consultations

5.0 on 5.0

If turnover for both you and your wife is more than 2 crores, both if you will have to undergo audit.

Please feel free to call/ revert in case you need more clarity.

Thanks and regards
Abhishek Dugar
CA CS B.Com
Abhishek Dugar
CA, Mumbai
2942 Answers
125 Consultations

5.0 on 5.0

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