By Tensing Rodrigues
Persons married under the Portuguese Civil Code in Goa enjoy a unique facility under the Income Tax Act, 1961. The provision reads as follows:
Section 5A – Apportionment of income between spouses governed by Portuguese Civil Code. (1) Where the husband and wife are governed by the system of community of property (known under the Portuguese Civil Code of 1860 as “Comunhão Dos Bens”) in force in the State of Goa and in the Union territories of Dadra and Nagar Haveli and Daman and Diu, the income of the husband and of the wife under any head of income shall not be assessed as that of such community of property (whether treated as an association of persons or a body of individuals), but such income of the husband and of the wife under each head of income (other than under the head “Salaries”) shall be apportioned equally between the husband and the wife and the income so apportioned shall be included separately in the total income of the husband and of the wife respectively, and the remaining provisions of this Act shall apply accordingly.
(2) Where the husband or, as the case may be, the wife governed by the aforesaid system of community of property has any income under the head “Salaries”, such income shall be included in the total income of the spouse who has actually earned it.
What it simply means is that: (1) The section is applicable to couples who are married in Goa under the Portuguese Civil Code of 1860. Whether such couples need to be residents of Goa or not, you can check with a lawyer; the section only says ‘governed by the system of community of property’; that is, if they are married under the said Civil Code.
(2) All incomes of such a husband and his wife, other than salary income (which includes pension), are to be added together and 50% of the sum is to be treated as the income of the husband and the other 50% as the income of the wife.
(3) The wife’s salary is to be treated as her income, and so also in case of the husband.
The section uses the word ‘shall’, not ‘may’. Which means the application of the section is not at the choice of the tax payer; it has to be necessarily applied. I do not know of any provision in the act which grants exemption from application of section 5A. This is binding on the assessee as well as the tax authority; if an assessee who is governed by the Portuguese Civil Code does not file a return under the said section, the tax assessor has to assess the tax liability by applying the section and issue the assessment order accordingly; except in the case where the effect of the section has been restricted by a ‘comunhão parcial’ or a ‘escritura pré-nupcial’.
This is not a special privilege granted to Goans. It is a section inserted in the Income Tax Act to conform it to the provisions of the prevailing Civil Code; or else the tax legislation would contravene the Civil Code. What lies at the base of the section 5A is the fundamental ‘communion’ or ‘inseparability’ of the assets owned by a husband and wife governed by the Portuguese Civil Code; or, in simple words, what is husband’s is wife’s, and vice versa. Therefore the income generated from those assets is also inseparable, and has to be assessed equally in the hands of the husband and wife in the proportion of 50-50. The section was introduced subsequent to a court judgement. If a husband owns a business, then it is owned by the wife as well; so the half income from the business is husband’s, and half is wife’s. So with land or house. So with the bank deposits. Therefore there is no need to split the assets to allocate income.
When filing your Income Tax Return, You need to specifically mention that you are governed by Portuguese Civil Code as per section 5A ? On the first page, after your personal details (Part A-GEN) there is a question : Are you governed by Portuguese Civil Code as per section 5A ? You have to tick ‘Yes’ or ‘No’ in response to this question; and fill Schedule 5A if you tick Yes. This schedule asks you to fill in the name of the spouse, PAN of the spouse and the details of the income of the spouse under all heads except ‘Salaries’. These are practically the same figures that you have filled for yourself; the figures pertain to income apportioned and the TDS apportioned. Make sure that the total (apportioned to you + apportioned to spouse) matches the total income and TDS under those heads. Also make sure that figures filled in Schedule 5A of your return match the figures filled in your spouse’s return; and vice versa.
* The author is an investment consultant. Readers can send their comments and queries to firstname.lastname@example.org