New Delhi, Sept. 22 -- Spouses generally gift money or assets to each other, but such transfers do not automatically shift the tax liability to the recipient. The Income-tax Act contains clubbing of income provisions that can require income from assets transferred to a spouse to be taxed in the hands of the spouse who made the transfer.

Isha Sekhri, Founder, Isha Sekhri & Associates LLP, explained that the clubbing of income provisions are an anti-avoidance mechanism designed to prevent taxpayers from reducing their tax liability by transferring income-generating assets to a spouse in a lower tax bracket, while reducing the family's overall tax liability.

Sekhri said the provisions generally apply when one spouse transfers money or an a...