Taxation of Minor Children in India: How Does It Work

Mr. Amit Gupta, MD, SAG Infotech

Authored by Amit Gupta, MD, SAG Infotech

As you looked up the technology, it has taken its drive and that too gearless but the children of nowadays are no less in chasing. It was a time when children were not met with many possibilities. Comparatively, now these teenagers are interrupted with several unique jobs and that also with good earning for themself. As you can see around there are many young entrepreneurs in the industry.

If the child is under the age of 18 who is referred to as a minor has an earning over the taxable slab, then liability comes under their Guardian/Parent on besides of their earning child to file taxes. There is no age bar behind filing income tax returns is the reason why.

When it comes to filing the tax, a minor can also file, if their earning amount is over Rs 15000 monthly. The salary can be made or not, it doesn’t make any difference. Through this article, you will get to know in what situation a parent can claim the income tax return of their child.

A Minor has a Kind of Income Receivable

A minor can file two kinds of income that can be named as earned money and unearned money as well.

Earned Money

When a child which is minor can take part in any competition, TV show, or sports tournament and acquire the allocated prize in sum, or even that minor child has some part-time jobs or may having own business, then that could be called an earned money.

Unearned Money – If that minor child does not obtain money from their hard – work or actions, however, they earn money as a form of a gift from any event from their well-wishers like their relatives, grandparents, family friends, and thus how, if the income gained by them is categorized into unearned money.

What does the Term ‘Clubbing Money’ Indicate?

At a point, merging Parent’s earned money with their child’s earned money will only be applicable once the latter has not reached its majority. Here, the term ‘clubbing the money is considered as the process where collecting the income of the parents along with their children. As per the Incom Tax Act, if a Child has earned from their respective business or any part-time job, then the obtained amount can be merged with earning the number of their guardians. But in the case where both mother and father are salaried then in that situation, the earned amount of of the child can be merged with whom earning is more in their parents.

Do I have to file Income Tax Return for my child in case I claim for her/him? 

There are two scenarios here – 

A Situation where the child is under the age of 18

A child who is earning has to file their own income tax should have their age under 18. However, as long as the child is the responsibility of the parent, then their certain guardian can also file on behalf of the child. Let’s understand this if your child is still not counted under the majority and receives an income above Rs.1500 monthly. On account of this, you have to pay the taxes on behalf of them.

Although, it has few circumstances where if the child falls under minority, then the parent wouldn’t claim the child’s income tax returns (ITR).

The situation, where the child is above 18 years of age 

Meanwhile, a child who is above 18 of age should have to file their income taxes. They will not be anymore counted as parents’ responsibility and on that note, they to have to file income taxes of their own. If your child has passed through the majority, then you can not anymore claim this ITR.

Important points to know prior to a Minor filing their own Income Tax Return 

1. Terms like yearly income, pension fund, taxable income, medical insurance, and more similar to that can be elaborated to minors prior to filing their own tax returns.

2. Child’ under 18 of age should have their own tax return forms

3. Children should secure a xerox of their expenditure and incomes during each financial year in order to reference and for the aim to secure.

4. While putting the return form, it is important to write accurately the taxpayer’s name along with the tax identification number.

5. It is crucial to keep in mind that tax records should be highly secured.

6. The most dependable and possible process for filling the ITR for a minor is indulging the services of a tax specialist.