CLUBBING OF MINOR’s INCOME – WHEN NOT REQUIRED!

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MINOR’s INCOME
Query 1]
  1. Whether there is income tax deduction on donation given to charitable trust ? If yes, whether entire amount given is eligible for deduction? Whether donation done to temple by way of receipt will also be eligible for deduction? Is there any restriction on the amount of donation?
  2. I am a salaried employee & not receiving any HRA from my employer. The person who receives HRA is eligible for income tax benefit. I am living in a rented premise in Nagpur. Also I have read in the earlier issues about the availability of deduction towards rent for persons who stays in a rented premise and not in receipt of HRA. And I shall be thankful if you can explain about the availability of income tax benefit on rent payment.
  3. By what date, I will be required to file the income tax return? Is there any exemption on the Interest from Bank FDR & S.B. A/c.?
  4. My son has earned Rs. 32,000/- in the last F.Y. 2010-11 from the Magic show. Whether his income is compulsorily required to be clubbed with my Income? Is there any exemption or exception? If clubbing is compulsory, can it be clubbed with the income of his mother, as her income even after clubbing would be below the basic exemption limit?
  5. What is the cost inflation index for the financial year 2011-12 for computing the capital gain tax liability? [SLP]
Opinion:
 
  1. INCOME TAX BENEFIT ON DONATIONS:
    Section 80G provides for a deduction in respect of donations to certain funds, charitable institutions etc subject to the conditions that such funds/ institutions are approved u/s 80G(5)(vi) of the I.T. Act, 1961. The deduction admissible is 100% or 50% of the donation amount depending upon the fund/ institutions to whom the donation is done. The total deduction u/s 80G is restricted to a maximum of 10% of the adjusted gross total income.
  2. INCOME TAX DEDUCTION ON RENT PAYMENT:
    An individual who is not in receipt of HRA from the employer is entitled to the benefit of deduction of rent from its income u/s. 80GG of the Income Tax Act.
    The conditions precedents to claiming deduction under this section are:
    1) He has to file the declaration in Form No. 10BA.
    2) He or his minor child , spouse or HUF of which he is a member , should not be owner of a house at the place where he ordinarily resides or performs his duties ; or he should not be owner of any house at any other place, the income therefrom is to be determined under section 23(2) (a) or, as the case may be, under section 23(4) (a) ( i.e. income from self-occupied house property )
    Amount of deduction – The deduction admissible shall be the lower of the following :-
    (i)                house rent incurred in excess of 10% of  “total income”; or
    (ii)             Amount at 25% of “total income”; or
    (iii)           2000 per month.
    The term “Total income” means total income after allowing all deductions expect the one provided under this section itself.
  3. DUE DATE OF FILING INCOME TAX RETURN
    The due date of filing the income tax return for salaried Assessee is 31st July. There is no exemption on interest arising out of Bank FDR & S.B. A/c.
  4. CLUBBING OF MINOR’S INCOME
    The income of Minor’s is required to be clubbed with the income of the parent by virtue of provision of section 64(1A) of the I.T. Act, 1961. It is required to be clubbed in the hands of that parent whose income is greater. Once the income is clubbed in the hands of any of the parents as mentioned above, it will continue to be clubbed in the income of that parent irrespective of the change in the income ratio thereafter. After clubbing, the income is eligible for exemption up to Rs.1,500/- U/s 10(32). However, certain exceptions are provided. The clubbing provision is not applicable in case the income is derived by the minor from manual work or from any activity involving his skill, talent or specialized knowledge or experience.
  5. COST INFLATIN INDEX FOR THE FY 2011-12
    The Cost Inflation Index for Financial year 2010-11 has been notified by CBDT vide his circular 59/2010 dated 21.07.2010 as “785”
MINOR’s INCOME

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