TAX LIABILITY ON INCOME OF A MINOR CHILD IN INDIA
Income Tax Act, 1961, has separate provisions for taxation of income of a Minor Child in india and clubbing of his income in the income of parents. We are discussing below the FAQs for easy understanding of the provisions of Law:-
FAQ 1 : Who is a Minor?
Reply : A child who has not attained (completed) the age of 18 Years during the Financial Year during which the Income is earned.
FAQ 2 : Can a Minor Child have a PAN Card in his Name?
Reply : Yes.
FAQ 3 : Who is liable to pay Income Tax on the Income of a Minor Child?
Reply : As per Section 64(1A) of Income Tax Act, 1961 – Any income that arises or accrues to the Minor Child (not being a minor child suffering from a disability of the nature specified in Section 80U) of an Individual, shall be added to the Income of the Individual.
FAQ 4 : Is there any Income on which the Minor will have to directly pay taxes and which is not included in the Income of the Parents?
Reply : Yes, following income that arises or accrues to a Minor Child, shall not be added to the income of Parent and the same shall be included in the Tax Returns of the Minor Child himself:-
a) Income from Manual Work Done e.g. Summer Jobs; or
b) Income from activity involving application of his skills, talent or specialised knowledge and experience e.g. Modeling, Athletics/ Sports, Tutions etc.
FAQ 5 : Income of Minor Child will be added in the Income of which parents (Father or Mother)?
Reply : As per the proviso to Section 64(1A), in the first year of income earnings by the Minor Child, the same shall be added to the income of the Parent whose Total Income (excluding the income of minor child) is greater. In subsequent years, the income of the Minor Child shall continue to be included in the Income of same Parent and shall not be included in the income of other parent, unless the Assessing Officer is satisfied that it is necessary to do so and that too after giving that parent an opportunity of being heard. In case if the parents of the Minor Child have divorced, the income of Minor Child shall be included in the income of parent who maintains the Minor Child.
FAQ 6 : Is there any basic exemption limit or deduction available from addition of the Income of Minor Child in the Parents Income?
Reply : Section 10(32) of the Income Tax Act, 1961 exempts income of the Minor Child upto a sum of Rs. 1500/- p.a. from being included in the Income of the Parent in accordance with Section 64(1A).
FAQ 7 : What will happen to the Income of Minor Child if both his parents have expired?
Reply : Where both the parents have expired, the Income of the Minor Child shall not be included in the Income of the Guardian BUT a separate Income Tax Return shall be filled in his own name.