Section 5A - Apportionment of income between spouses governed by Portuguese Civil Code

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Section 5A of the Income Tax Act, 1961 provides for the apportionment of income between spouses governed by Portuguese Civil Code. According to this section when a husband and wife are subject to "COMMUNIAO DOS BENS", i.e., the community property system under the Portuguese Civil Code, 1860, their income under any head of income (whether as an association of persons or body of individuals) shall not be assessed as that of such community of property, but rather, their income under each head of income (other than under "Salaries") shall be divided equally between them and this income shall be included separately in their total income respectively. As far as any income under "Salaries" earned by the husband or wife subject to the aforementioned system of community property is concerned, it must be included in the total income of the spouse who actually earned it.

It is pertinent to note that the Portuguese Civil Code, 1860 applies to the State of Goa and to the Union territories of Dadra and Nagar Haveli and Daman and Diu. Under the code, there are 4 types of marriages:

1. Community property law

2. Absolute separation of property

3. Separation of assets existing prior to marriage and communion of property after marriage

4. Dotal regime

If no express contract is entered into with regard to one of the four types, the community property law is applied by default. Majority of the marriages are thus, subject to the community property law to which Section 5A applies. Under this law, each spouse instantly obtains joint ownership of the assets they currently own as well as those they are entitled to via inheritance. Essentially, community property refers to all of a person's assets and liabilities that they bring into a marriage and without the express approval of the other spouse, neither spouse may dispose of or in any manner encumber these assets.