What is meant by diversion of income?

Diversion of Income is the process of diversion of income before it is earned by the assessee (taxpayer). Such amounts are excluded from the total income of the assessee during income tax computation as the income gets diverted to someone else before being earned by the assessee.

What is the impact of diversion of income on the taxability of income?

In case of diversion of income by overriding title, the income before coming to the hands of the assessee is diverted from the source itself and hence is not liable for tax. But in case of application of income the transaction is overlooked and the assessee in whose hands the income accrues becomes liable for tax.

What is clubbing of income in income tax?

According to the stipulations of the Income Tax Act, a person has to pay taxes on all taxable income earned during a financial year. At the time of computing the Gross Total Income, if the income of any other person in a family is included, then the inclusion is called ‘Clubbing of Income’.

What is aggregation of income in income tax?

Aggregate income is the total of all incomes in an economy without adjustments for inflation, taxation, or types of double counting.

What do you mean by diversion?

1 : the act or an instance of diverting or straying from a course, activity, or use : deviation Bad weather forced the diversion of several flights. 2 : something that diverts or amuses : pastime Hiking is one of her favorite diversions.

Is pin money an income?

Pin Money means “A reasonable allowance given to the wife by her husband for her dress and usual household expenses” Pin Money is not taxable.

How do I stop clubbing of income from husband and wife?

To avoid the clubbing of income of the husband and wife it is therefore recommended that the husband should not make any gift to the wife of any income producing assets so also the wife should avoid making gift to her husband so as to prevent clubbing of income.

How do you calculate AE?

The equation for aggregate expenditure is: AE = C + I + G + NX. The aggregate expenditure equals the sum of the household consumption (C), investments (I), government spending (G), and net exports (NX).

What is an example of diversion?

An interruption from a friend in the middle of doing tedious work is an example of a diversion. When money is taken from education funds and instead put into funds for seniors, this is an example of a diversion of resources. When a road is closed and traffic is rerouted, this is an example of a diversion.

How do you use the word diversion?

Diversion in a Sentence 🔉

1. Soldiers often use a diversion tactic, like a small attack away from their target, to sneak up on the enemy.
2. Melissa took a diversion from her normal afternoon workout and decided to go to the movies instead.

How is diversion of income excluded from total income?

Diversion of Income is the process of diverting income before it is earned by the assessee. Such amount shall be excluded from the Total Income of the assessee as the income is diverted to someone else before being earned by the assessee. In case of diversion of Income there is an over- riding title of any other person on such income.

What is the difference between application and diversion of income?

In other words, applied income shall be taxable in the hands of the assessee. 2. Diversion of Income is the process of diverting income before it is earned by the assessee. Such amount shall be excluded from the Total Income of the assessee as the income is diverted to someone else before being earned by the assessee.

When is income diverted before it reaches the assessee?

Where, by the obligation, income is diverted before it reaches the assessee it is deductible; but where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequence, in law, does not follow.

When is income diverted by overriding title?

When income or a portion of income is diverted at the source by an overriding title before it started flowing into the channel which was to reach the assessee concerned it could be excluded from his assessable income.