We often receive questions about tax liability of a person in case of any income that accrues or is paid to a minor. Whether it is the minor’s own tax liability or the income of the minor should be clubbed with his father’s income or his mother’s income or the income should be divided into two parts and proportionately clubbed with the income of both the parents for calculation of income tax etc.
Section 64(1A) of income tax act clarifies on above matters. The said section provides that any income that accrues or is paid to a minor is added to the parent’s income and such person will be taxed just like that his/her own income. (However, the parent can claim an exemption of Rs.1, 500/- under section 10(32) of IT act for each minor child where income is clubbed with his/her income.)
The IncomeTax act clarifies to the above question with whose income minor’s income to be added for income tax calculation purpose. The details are as under.
- When both mother and father are earning then the income of the minor is added to the income of that parent whose income is greater.
- In case the parents are divorced, the income of the minor is added to the income of the parent who has the custody of minor.
- If both the parents of the child are deceased, the income of the minor is not clubbed with the income of legal guardian, but instead a separate income tax return is filed. For this purpose, PAN card can be applied in the name of the minor.
- In case a minor earns income from work/or activity for which he uses special talent or knowledge, the minor is required to file an income tax return in his/her own name. For example, a minor cricketer (who is below the age of 18 years) was bought by an IPL franchise for Rs.50 lac in the IPL auction. In this case the boy would have to pay tax on his own.
- Income of a child who is suffering from any disability specified under Section 80U will not be clubbed with the income of the parent. A person is considered differently-abled when he is suffering from more than 40% of any of the following: (i) blindness, (ii) poor vision, (iii) hearing impairment, (iv) Loco motor disability and (v) mental illness.
Another question; is it alright if one of the parents of the minor to submit form 15 G with the bank since his/her income is below the taxable income?
In view of the clarifications provided above, we may conclude that whoever has to pay tax as per income tax rule shall submit form 15G if eligible, not anybody else.
