Though most people believe income tax is only for adults, did you know even minors—that is, children under eighteen—may be liable in India? Understanding taxes for minors is crucial, regardless of how much money your child makes from investments, gifts, or savings. Keeping current will enable you, as a parent or guardian, better plan and prevent surprises during tax filing.
Who Is Considered a Minor?
Legally speaking, anyone under eighteen in India is a minor. Their income is taxable whether in their name or their parent’s name even though they are not permitted to file taxes directly.
From what sources might a minor have income?
A minor can make money from a variety of sources, including: fixed deposit or bank account interest
Gifts from friends or family
Dividends derived from names-based investments
Mutual fund or share capital gains
Income from performing, posing, or talent-based work
Taxes for minors enter the picture in this situation.
How Taxes a Minor’s Income?
Usually under Section 64(1A) of the Income Tax Act, a minor’s income is clubbed with one of the parents—usually the one with greater income. This implies the parent must include the child’s income when submitting their own return.
deviations from the Clubbing Rule
Two main situations exist whereby the minor’s income does not match that of the parent:
Income derived from the minor’s own aptitude or skill
Child actor, singer, or influencer making money from employment, for instance.
disabled small under Section 80U
Should the minor have a legal defined disability, their income is not clubbed.
In these situations, the minor may file a separate tax return on behalf of themselves.
Minor’s Income Exemption
For up to two children, each child gets ₹1,500 annually exempt. Therefore, should your child generate passive income—such as interest—you can cut ₹1,500 from that income and then add it to your own.
How Should Minor Income Reported?
In clubbing, when:
Put it under “Income from Other Sources,” in the parent’s ITR
Clearly state it in the income split.
Claim the 1,500 exemption, if qualified.
In cases when clubbing is not relevant:
File a separate return using the PAN of the minor.
Income will be subject to regular slab rates.
Minor’s PAN Card
Even if a minor cannot directly file taxes, if the minor has taxable income a PAN card is still required.
Investments are made on their name.
Gifts valued more than ₹50,000 are received
Minors can apply for PAN via the NSDL or UTI portal under the direction of parents acting as representatives.
Minors’ Tax Planning Advice
Invest in tax-free choices including Sukanya Samriddhi Yojana or PPF.
Use clubbing in conjunction with exemption.
Steer clear of tax problems by avoiding repeated gifts from non-relatives.
Make sensible use of the minor’s own skill-based income to divide tax filing.
Finish Word
Knowing taxes for minors helps parents keep compliant and make wise investment plans. Knowing the rules guarantees that, whether it’s interest income or earnings from a child’s talent, you avoid missing out on exemptions or running across problems during filing. A little preparation now will enable your child and you to travel more smoothly financially.