Question: Is income of minor child taxable for Income Tax in India?
Answer: Generally speaking, the income of a minor child is taxable for Income Tax in India, subject to certain exemptions. However, depending on the nature of the income earned by the minor, the person who has to pay tax on such income may differ.
(A) Where minor’s income is included in parent’s income:
In this regard, Section 64(1-A) of the Income Tax Act, 1961, is relevant and the same is reproduced below:
“(1-A) In computing the total income of any individual, there shall be included all such income as arises or accrues to his minor child, not being a minor child suffering from any disability of the nature specified in Section 80-U:
Provided that nothing contained in this sub-section shall apply in respect of such income as arises or accrues to the minor child on account of any—
(a) manual work done by him; or
(b) activity involving application of his skill, talent or specialised knowledge and experience.
Explanation.—For the purposes of this sub-section, the income of the minor child shall be included,—
(a) where the marriage of his parents subsists, in the income of that parent whose total income (excluding the income includible under this sub-section) is greater; or
(b) where the marriage of his parents does not subsist, in the income of that parent who maintains the minor child in the previous year,
and where any such income is once included in the total income of either parent, any such income arising in any succeeding year shall not be included in the total income of the other parent, unless the Assessing Officer is satisfied, after giving that parent an opportunity of being heard, that it is necessary so to do.”
Thus, it is clear from the above that the income of the minor child will generally be clubbed together with the income of his parent. His parent will then be taxed on such total income. This provision is generally applicable to those sources of income for which the minor has not made any special efforts (such as doing some manual work or using his special skills, talent, knowledge or experience); e.g., where the minor child earns interest on fixed deposits or bank account or some other investments made by his parents or other relatives in the name of the minor child.
However, if the minor child is suffering from any disability of the nature specified in Section 80-U of the Act, then his income will not be clubbed together with the income of the parent. In Section 80-U of the Income Tax Act, “disability” is defined as under:
“disability” shall have the meaning assigned to it in clause (i) of Section 2 of the Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 (1 of 1996), and includes “autism”, “cerebral palsy” and “multiple disabilites” referred to in clauses (a), (c) and (h) of Section 2 of the National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 (44 of 1999);
Further, when the income of the minor child is being clubbed together with the income of the parent, then as per the provisions of Section 10(32) of the Income Tax Act, an exemption of Rs. 1500 per annum is granted in respect of each such minor child.
Now, whether the minor child’s income is to be included in the income of the mother or father, will be decided in accordance with the provisions laid down in the Explanation given to Section 64(1-A), as noted above.
(B) Where minor’s income is taxed separately:
It is pertinent to point out that where the minor child has earned the income by some manual work done by him; or by some activity involving application of his skill, talent or specialised knowledge and experience, in that case such income of the minor shall NOT be included in the income of his parent. In such case, the minor child himself will be taxable directly for the purposes of Income Tax, if his income exceeds the exempted limit.