Income from Minor Child

Introduction

In this article I will be writing about clubbing the income from minors. If the person age below 18 is considered as minor and he/she is not eligible to submit the income tax under the Indian Income tax act except certain exceptional cases. If a minor is earning income, then it will be clubbed with his guardian or parents income and will be paid tax for the amount. This article explores all the details involved in the minor income and how it is clubbed with others income. If you have any doubts please post it in the comments section. Subscribe to our future articles here.

Minor’s Income

Normally, the income of any minor is clubbed in the hands of either of his parents and, therefore, the minor need not file the return and hence PAN is not required. There are some exceptions.

All the income of a physically or mentally handicapped minor child will be directly assessed in the hands of the child. Similarly, a minor earning income by way of manual work or an activity involving application of his skill, talent or specialized knowledge and experience, is directly assessed in the hands of the child.

Under such situation, the minor requires a PAN. However, if it is only investment income, then the same will suffer clubbing.

Q : I have two children, both minors. The income of the first child was clubbed in my hands as at that time my total income was higher than that of my wife’s. The second child did not have any income at that time. In the current year, the second child has income but my wife’s total income will be higher than mine. In whose hands will the second child’s income be clubbed?

A : Section 64(1A), which provides for clubbing of the income of a minor child with that of the parent, provides that where the marriage of the parents subsists, the income of the minor child is to be clubbed in the hands of the parent whose total income is higher and further that once the income of a minor child is clubbed in the hands of one parent, the same is to be continued to be clubbed in the hands of that parent unless the assessing officer after giving an opportunity of being heard to the other parent is satisfied that the income needs to be clubbed in the hands of that other parent. In your case, since your second child has had income only in the current year and since in the current year your wife’s total income would be higher than yours, your second child’s income would have to be clubbed in your wife’s hands and not in yours.

Summary

In this post I have explained about the clubbing of minor’s income. This provides only the basic ideas on how to treat the minor’s income. There many be many other rules which will be applicable only in the specific scenarios. I will write it in my future articles. Thank you for reading this article. Please subscribe to our future articles here.

Related posts:

1. Income Tax for Agricultural Income
2. Factors needs to consider for computing taxable income
3. Income Tax Exemption and Rules on Gifts as Income of Source
4. Income Tax Exemption on Donations (NGO) under Section 80g
5. Joint Home Loans and Tax Benefits