Taxability of Minor Income

Taxability of Minor Income

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Taxability of Minor Income

 

Author

CA. Sahil Dhingra

 

 


 

Introduction:
  • Any person under the age of 18 is considered a minor.
  • Minors can earn an income from savings in a bank account, fixed deposits or other investments made in their name by the parents.
  • If both the mother and father are earning, the income of the minor is added to the income of that parent whose income is greater.
  • If the parents are divorced, the minor’s income is added to the parent’s income who has the custody of the child.
Whether PAN Card can be applied for a minor?
  • Yes, PAN card can be applied for a minor.
Clubbing of Income:
As per section 64(1A) of Income-tax Act, 1961 the income accrues or arises to his minor child shall be clubbed in the income of parents in the following manner:
(a) Where the marriage of his parents subsists, in the income of that parent whose total income (excluding the income includible under this sub-section) is greater; or
(b) Where the marriage of his parents does not subsist, in the income of that parent who maintains the minor child in the previous year.
Where any such income is once included in the total income of either parent, any such income arising in any succeeding year shall not be included in the total income
of the other parent, unless the Assessing Officer is satisfied, after giving that parent an opportunity of being heard, that it is necessary so to do.
Exceptions to the Clubbing of Income:
(1) Income as arises or accrues to the minor child on account of any—
(a) manual work done by him; or
(b) activity involving application of his skill, talent or specialised knowledge and experience.
(2) A minor child suffering from any disability of the nature specified in section 80U.
Exemption in respect of clubbed income of minor:
In the case the income of an individual (i.e. parent) includes the income of his/her minor child as per sub-section (1A) of section 64, such parent shall be entitled to exemption of Rs. 1,500 in respect of each minor child. However, if income of any minor so includable is less than Rs. 1,500 then the entire income shall be exempt as per section 10(32) of Income-tax Act, 1961.
Do you know in case the asset transferred to a minor child (not being a minor married daughter) without consideration or inadequate consideration is a house property then, by virtue of section 27(i), the transferor will be deemed owner of the house property. Therefore the income from house property will be taxable in the hands of transferor- parent, being the deemed owner not in the hands of minor child. Consequently, clubbing provisions under section 64(1A) would be attracted in respect of such income, due to which the benefit of exemption u/s 10(32) cannot be availed against such income.
Do you know in case the asset transferred to a minor married daughter without consideration or inadequate consideration then, section 27(i) is not attracted, In such a case, the income from house property will be included u/s 64(1A) in the hands of parent, whose total income before including minor child’s income is higher; and the benefit of exemption u/s 10(32) can be availed by that parent in respect of the income so included.
For further clarifications on the same, please reach out to me on the above mentioned details.

 

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