Taxation of Minors Income – Some key questions are answered in this blogpost. Any person under the age of 18 is considered a minor.
Table of Contents
When do minors have to pay tax on their income?
Minors can earn income from various sources such as bank accounts, investments, or earnings from activities like acting or manual work. However, the taxation of minors’ income varies depending on the nature of the income and certain circumstances.
How is a minor’s income taxed, and what is the concept of “clubbing of income”?
Any income earned by a minor is typically included in the parent’s income, a concept known as “clubbing of income.” This means that the taxes on the minor’s income are paid in the same manner as the tax on the parent’s income. For instance, interest earned from investments made in the minor’s name, like a fixed deposit, will be added to the parent’s total income for tax purposes.
How is a minor’s income taxed in the case of divorced parents? [Taxation of Minors Income]
In the case of divorced parents, the minor’s income is added to the income of the parent who has custody of the child. However, the parent can claim an exemption of ₹1,500 for each minor child whose income is clubbed.
Are there exceptions to this rule of clubbing of income for minors?
Yes, there are exceptions. If a minor earns income from their skills, such as acting, advertisements, or winning competitions like TV shows, the income may be taxed in the minor’s own hands. In such cases, a separate income tax return is filed by the minor’s parent or guardian as a representative assessee of the minor.
How is income taxed for a disabled minor? [Taxation of Minors Income]
For a child with a disability exceeding 40%, such as hearing impairment, the income will not be clubbed with the parent’s income. Instead, it will be reported separately in the child’s return. If the disability is below 40%, the income will be clubbed with the parent’s income.
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What happens when both parents of a minor are deceased? [Taxation of Minors Income]
In cases where both parents are deceased, a separate income tax return needs to be filed for the minor. The legal guardian or representative must register as a ‘representative assessee’ and file the income tax returns for the minor.
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