Clarity on tax for minor


#1

My child’s won a dancing competition in my state and earned a cash prize. He is below 18 so do i club the money with my income?


#2

Many congrats to you and your child for winning the competition. Any income earned by a minor
child is liable for income tax. The income generated may be in any form except when the child has earned the money using his talent or some special knowledge.

So in your case your minor child will be liable to pay a tax on the income and it will not be clubbed to your income.


#3

Hi Meera,

Congrats to your kid! The income of your kid will not be clubbed with yours for tax purposes. The clubbing of income concerns income from investments by you made on behalf of a close relative such as minor child, spouse or daughter-in-law. These incomes are clubbed and you are ultimately taxed on the overall income. All investments including property, Fixed Deposits, shares, Mutual Funds and post office savings etc. are covered under clubbed income.

Clubbing of income is governed by Sections 60 to 64 of the Income Tax Act, 1961. The sections also state that income derived from assets that are directly or indirectly transferred in cases other than for due consideration to other people or associations that are likely to benefit the assessee’s spouse or daughter-in-law are also to be clubbed with the assessee’s earnings.

Here are the rules for clubbing of income in case of minor child (under 18 years):
• Income from Fixed Deposit accounts made in the name of a minor child will be clubbed with that of the higher earning parent and taxes accordingly. In case of divorced parents, the one maintaining the child will be taxed.
• Income of a minor child when clubbed with your own will fetch you tax exemptions up to Rs. 1,500 (subject to actual income) for each child.
• Exceptions exist for income of disabled children as well as for minors who earn income from their talents, experience, knowledge or manual work.

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Cheers,
BB Expert