Income Tax 2025

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Section 10: Apportionmet of income between spouses governed by Portuguese Civil Code. ​

10 ​

If a husband and wife are governed by the community of property system (known as “COMMUNIAO DOS BENS” under the Portuguese Civil Code of 1860) in the State of Goa and the Union territories of Dadra and Nagar Haveli and Daman and Diu, then––

10(a) ​

their income under any head of income shall not be assessed together as that of community of property;

10(b) ​

the income mentioned in clause (a) under each head of income other than “Salaries” shall be divided equally between the husband and the wife

10(c) ​

the income so divided shall be included separately in the total income of the husband and the wife, and the remaining provisions of this Act shall apply accordingly; and

10(d) ​

where either the husband or the wife, has any income under the head “Salaries”, that income shall be included in the total income of the spouse who has actually earned it.

Explanation

1. Section Summary ​

This section addresses how income is taxed for married couples governed by the Portuguese Civil Code in Goa, Dadra and Nagar Haveli, and Daman and Diu. Under this code, spouses are subject to a "community of property" system (known as Communiao dos Bens), where property and income are considered jointly owned. The section clarifies that, for tax purposes, their income will not be assessed as a single unit but will instead be divided and taxed separately.

2. Key Changes ​

  • Separation of Income: Previously, income under the community of property system might have been treated as a single taxable unit. Now, income is divided and taxed separately for each spouse.
  • Exclusion of Salaries: Salaries are treated differently—they are taxed solely in the hands of the spouse who earns them, rather than being divided.

3. Practical Implications ​

  • For Taxpayers: Spouses in these regions will now file separate tax returns for their share of income, except for salaries, which remain with the earning spouse.
  • For Businesses and Employers: Employers must ensure salaries are reported under the correct individual’s PAN (Permanent Account Number).
  • For Compliance: Taxpayers must accurately divide and report income under each head (e.g., house property, capital gains) equally between spouses.

4. Critical Concepts ​

  • Community of Property System (Communiao dos Bens): A legal framework where all assets and income acquired during marriage are considered jointly owned by both spouses.
  • Heads of Income: Income is categorized under different heads (e.g., salaries, house property, business income). Under this section, all heads except salaries are divided equally.
  • Interaction with Other Laws: This section overrides the general community of property principle for tax purposes, ensuring compliance with the Income Tax Act, 1961.

5. Compliance Steps ​

  1. Identify Income Heads: Separate income into categories (e.g., house property, capital gains, business income).
  2. Divide Income Equally: Allocate 50% of income under each head (except salaries) to each spouse.
  3. Report Salaries Correctly: Include salaries only in the total income of the spouse who earned them.
  4. File Separate Returns: Each spouse must file their own tax return, including their share of divided income and any personal income (e.g., salaries).

6. Examples ​

  • Scenario 1: A couple earns ₹10 lakh from house property and ₹8 lakh from business income. The husband earns a salary of ₹12 lakh, and the wife earns ₹6 lakh.

    • House property income: ₹10 lakh ÷ 2 = ₹5 lakh each.
    • Business income: ₹8 lakh ÷ 2 = ₹4 lakh each.
    • Salaries: ₹12 lakh (husband) and ₹6 lakh (wife) remain with the respective earner.
    • Total taxable income: Husband = ₹5 lakh + ₹4 lakh + ₹12 lakh = ₹21 lakh; Wife = ₹5 lakh + ₹4 lakh + ₹6 lakh = ₹15 lakh.

  • Scenario 2: A couple has no salary income but earns ₹20 lakh from capital gains.

    • Capital gains: ₹20 lakh ÷ 2 = ₹10 lakh each.
    • Each spouse reports ₹10 lakh in their tax return.

This section simplifies tax compliance for couples under the Portuguese Civil Code by ensuring income is divided and taxed fairly, while maintaining clarity on salary taxation.