In case of individuals, income tax is applicable on the slab system on total income. As the income increases, the applicable tax rate increases. Some taxpayers in higher income slab may tend to divert some portion of their income to minimize tax burden. Therefore to prevent such tax avoidance, clubbing of income provisions have been incorporated.
So, if you are planning to transfer assets or income to another person in order to avoid tax implications, then such transfers could also be taxable in your hands.
Even genuine gifts to friends and family can also attract clubbing provisions under Income Tax Act. So, it is important to have insight knowledge of clubbing provisions to avoid any tax implications or penalties.