As per the general principles of tax laws, a child who is below 18 years of age is said to be a minor. Many a times, people are confused about whether minors are liable to pay Income-tax or not. Let us make it simple to understand. A minor child may be earning interest on fixed deposits or saving banks account or some other investments made by his relatives in minor child’s own name. Such income is to be clubbed with his parents. Now the question arises that with whose income will minor child’s income be clubbed, his father’s or his mother’s? Well, Income-tax Act says that income of minor child is to be clubbed with that of the parent, whose income is higher . However there may be a case where marriage of parents does not subsist, in such case, the income of a minor shall be clubbed with the income of the parent who maintains the child.
If minor is made a partner in a partnership firm, and if interest on capital is paid to him then such interest shall also be clubbed with that of the parent. In general, we can conclude that most of minor’s income is to be clubbed with parents. However, if the income of child is clubbed in the income of taxpayer, he is allowed an exemption from clubbed income upto Rs. 1,500/- per child (maximum 2 children).
However, the Income-tax Act has provided some exceptions in which minor’s income will be taxable in his own hands. The exceptions are as follows-
1. If a minor earns any income using his specialized skills, talent, knowledge or manual work, then such income earned will be taxable to the minor himself.
E.g. – If a minor child participates in a singing competition and won prize money of Rs. 5,00,000/-, in such case, prize income will taxable as minor’s own income.
2. If a minor child is suffering from any disability specified under section 80U such as blindness, mental illness, autism etc., in such case income earned by a minor will be taxable as his own income.
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