Split Income Across Family Members to Save ₹2-4L in Tax
Multiple family members = multiple ₹2.5L exemptions. Split ₹30L across 3 people = save ₹3L. Avoid Section 64 clubbing.
What is This Hack?
Leverage India's progressive tax system by legitimately splitting creator income across family members who perform genuine work. Each person gets separate ₹2.5L-3L basic exemption, potentially saving ₹2-4L annually for ₹30-50L family channels while staying compliant with Section 64 anti-clubbing rules.
How It Works
Understanding Progressive Tax Slabs
India's income tax follows progressive slab rates: **Old Tax Regime:** - ₹0-2.5L: 0% (NIL) - ₹2.5L-5L: 5% - ₹5L-10L: 20% - Above ₹10L: 30% **New Tax Regime (FY 2024-25):** - ₹0-3L: 0% (NIL) - ₹3L-7L: 5% - ₹7L-10L: 10% - ₹10L-12L: 15% - ₹12L-15L: 20% - Above ₹15L: 30% When one person earns ₹30 lakh, they lose the benefit of lower slabs. But if 3 family members each earn ₹10 lakh, each gets their own ₹2.5L/₹3L exemption and benefits from lower tax slabs on their share.
The Income Splitting Math
**Single Person Earning ₹30L (Old Regime):** - Total Income: ₹30,00,000 - Tax Calculation: - First ₹2.5L: ₹0 - Next ₹2.5L (₹2.5L-5L): ₹12,500 @ 5% - Next ₹5L (₹5L-10L): ₹1,00,000 @ 20% - Remaining ₹20L (₹10L-30L): ₹6,00,000 @ 30% - **Total Tax: ₹7,12,500** (+ cess = ₹7,41,000) **Three People Each Earning ₹10L (Old Regime):** - Person 1: ₹10,00,000 income → Tax = ₹1,12,500 - Person 2: ₹10,00,000 income → Tax = ₹1,12,500 - Person 3: ₹10,00,000 income → Tax = ₹1,12,500 - **Total Family Tax: ₹3,37,500** (+ cess = ₹3,51,000) **Tax Saved: ₹7,41,000 - ₹3,51,000 = ₹3,90,000 annually**
Genuine Work Requirement - Section 64 Compliance
Section 64 of the Income Tax Act has 'clubbing provisions' that add back artificial income transfers to the original earner's income. To avoid Section 64 scrutiny: **What Qualifies as Genuine Work:** - On-camera presence (speaking, hosting, appearing in videos) - Video/photo editing and post-production - Research, scripting, content planning - Social media management, community engagement - Thumbnail design, graphics creation - Channel management, analytics tracking - Equipment operation (camera, lighting, audio) - Location scouting, logistics management **Documentation Required:** - Written contracts/agreements specifying roles - Separate invoices from each family member - Credits in video descriptions - Email trails, Slack/WhatsApp work discussions - Time logs or work records - Social media accounts managed by each person **Red Flags to Avoid:** - Family member has no involvement in channel - Disproportionate income vs. work contribution - No documentation of work performed - Income paid but no actual services rendered - Minor children receiving large incomes without work
Optimal Income Split Strategy
**For ₹30L Annual Channel Income:** **Option 1: Equal 3-Way Split** - Creator (husband): ₹10,00,000 - Spouse (wife): ₹10,00,000 - Parent/Adult Child: ₹10,00,000 - Works when all 3 contribute equally **Option 2: Contribution-Based Split** - Primary Creator (60% work): ₹18,00,000 - Supporting Family Member (30% work): ₹9,00,000 - Part-time Helper (10% work): ₹3,00,000 - Reflects actual work division **Option 3: Strategic Slab Optimization** - Person in higher tax bracket: ₹12,00,000 - Spouse (homemaker/lower income): ₹12,00,000 - Parent (senior citizen with ₹3L/₹5L exemption): ₹6,00,000 - Maximizes exemptions and lower slabs **Key Principle:** Income split must be reasonably proportionate to actual work contribution to pass Section 64 scrutiny.
Real Example: Family Vlogging Channel
**Channel:** 'Travel With Sharmas' - Family travel vlog **Annual Income:** ₹40 lakh (YouTube AdSense, brand deals, affiliate income) **Income Distribution:** 1. **Rajesh (Father - Primary Creator):** ₹20,00,000 - Work: 50% - On-camera host, video shooting, final editing, brand negotiations - Tax: ₹3,62,500 2. **Priya (Mother - Co-Creator):** ₹15,00,000 - Work: 37.5% - On-camera co-host, social media management, thumbnail design, community engagement - Tax: ₹2,12,500 3. **Grandparent (Senior Citizen):** ₹5,00,000 - Work: 12.5% - Occasional on-camera presence, location research, story ideation - Tax: ₹0 (₹5L senior citizen exemption in new regime) **Total Family Tax: ₹5,75,000** **If Only Rajesh Earned ₹40L:** - Tax: ₹10,92,500 (old regime) - **Savings: ₹10,92,500 - ₹5,75,000 = ₹5,17,500 annually** **Compliance:** - All three have separate contracts with the channel's business entity - Each issues monthly invoices for their services - Video credits list all three as creators - Separate bank accounts for receiving payments - Individual ITR filings by all three members
Prerequisites & Requirements
- Family members willing to perform genuine work for the channel/business
- Separate contracts or agreements documenting each person's role and compensation
- Genuine work division that can be documented and proven (not artificial arrangement)
- Separate bank accounts for each earning family member
- Ability to maintain proper documentation (invoices, payment proof, work evidence) for 7+ years
- Each family member must file individual Income Tax Returns
- Work contribution must be proportionate to income allocated (Section 64 compliance)
Key Benefits
- Potential savings: ₹1,00,000-4,00,000 annually
- Implementation time: 1-2 months for complete setup and documentation
- Legal status: fully legal (if work is genuine)
- Risk level: medium (Section 64 scrutiny risk if artificial)
Important Considerations
This hack has a medium (Section 64 scrutiny risk if artificial) risk level. While it's completely legal, proper implementation requires careful attention to compliance requirements. Consider consulting a CA for personalized guidance.
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