Does the income of a minor call for levy of taxes?

Tax and earning goes hand in hand .According to Income Tax Act of 1961, every individual has to pay tax as per income tax slab. In our previous article- Quick guide for individuals filing ITR for first time, we have talked about eligibility of tax deduction for individual, senior citizens and super citizens. Now, one question arises here –Are minor accountable for tax payment? Well, the answer is yes and lets discuss how in this article.

In India, a minor is someone who is less than 18 yrs of age. Under section 64(1) any revenue generated by   a minor is clubbed with his parents assests (whichever is higher of the two).However, there are certain exceptions to this rule where his salary will not be clubbed –

  • Any kind of manual work done by him.
  • If he is suffering from any kind of disability under section 80U.
  • Any kind of salary earned by his/her knowledge, experience, talent or skill.

What does clubbing means?

In general any individual pays tax for money earned by him. Clubbing applies to some of the special scenarios where taxable assests of another entity is combined with a person’s own taxable assests. Hence, he is responsible to pay tax for both the parties.

Section 10(32) states that any individual who is clubbing his/her child’s wages can claim either of the lesser amount –

There are certain rules for including children’s profits to his/her parents assests –

  • If a child’s parents are dead then he has to file a separate income tax. A guardian can’t get the salary inclusion benefit from this.
  • When both the parents are working, his salary will be included with income of either parent whosoever is earning more.
  • If marriage doesn’t sustain between parents, then spouse having custody can club his money with kid’s revenue.

Clubbing of juvenile money is only allowed until he/she remains of 18yrs of age. So, for the cases when he attains 18yrs of age during the financial year, he will be declared Major. A major needs to be assessed individually. Exceptions are in cases when suffering from blindness or any other disability under section 80U.

Under section 64(1) income tax of a minor includes-

  • Step Children.
  • Adopted Children.
  • Minor married daughter

Under section 160, Income tax Act a minor can be availed PAN via Representation Assessee. Representation Assessee has to submit his details for item 14 of PAN application. He also has to submit his Proof of Identity. Minor will quote PAN of his father /mother / guardian provided he does not have any income chargeable to income-tax. In most of the cases, kid’s earning is via the fixed deposits, bank investments and other savings made by his/her parents.

So, we all should plan our taxes for the financial year considering above deduction schemes. Register for your little one’s PAN today.  Be aware and invest your hard earned money wisely. For other latest updates about income tax deductions, policies and schemes Contact Us .