New Income Tax Bill – 2025 Vs. Clubbing of Income: A Shift from Qualification to Skills in the Income Tax Bill, 2025

The Income Tax Bill, 2025 marks a significant shift in how income clubbing provisions are applied, focusing more on skills and results rather than just formal qualifications.

Current Provision (Income Tax Act, 1961 – Section 64(1))
Under the existing law, if an individual has a substantial interest in a concern and makes payments (salary, commission, fees) to their spouse, such income is clubbed in the hands of the individual unless both of these conditions are met:

The spouse must have technical or professional qualifications

The payment must be attributable to such qualifications or experience

Proposed Change (Income Tax Bill, 2025)
The new bill removes the rigid requirement of formal qualifications. Instead, if the spouse renders services using a technical or professional skill set, the income will not be clubbed, even if they do not hold a formal degree.

Example:
A is a director in AB Pvt Ltd and pays ₹1 lakh as commission to B (spouse of A) for achieving sales targets through digital marketing. B does not have an MBA in marketing but has acquired digital marketing skills via an online certification course.

Under the Income Tax Act, 1961 – Since B lacks a formal degree, the ₹1 lakh commission is clubbed in A’s hands, despite the results achieved.

Under the Income Tax Bill, 2025 – Since B used a valid skill set to drive sales, the income will not be clubbed even without a formal qualification.

This change carries a powerful message – in today’s dynamic business world, skills and results matter more than just degrees.