Tax provisions related to your minor child

minor childMinor’s income will get clubbed in the hand of either of parents whose income is higher before clubbing provision is applied. If such minor generates it because of his skills, talent or specialized knowledge and experience then it will not be clubbed in the hands of parent.

IT act also states, if the minor is suffering from any disability and such disability is specified in section 80U as specified disabilities to get qualify for deduction then the income generated by such minor will be taxed separately and will not get clubbed in the hands of parents. Minor will also eligible for IT deduction under section 80U.

If you transferred an asset for the benefit of your minor child then such asset may get the benefit of not paying tax but any income generated out of such asset will get clubbed in the hand of the parent.  

If you are transferring income generated out of an asset to your minor child then it will get added in your hand for the purpose of taxation.

If anything has been generated out of your minor child’s talent that amount may not get added in your hand as this has been specifically excluded from clubbing provision of IT act. But, if your minor child has invested such amount in a bank fixed deposit and such fixed deposit generated an interest amount then such interest generated will get added to your taxable amount under the head “Other Sources”

However if the money generated by the minor child get invested in a public provident fund scheme then the interest generated will not be taxable in the hands of parents as such interest amount is specifically excluded from tax provision and will not be taxed. Instead of investing in a fixed deposit scheme one can open a public provident fund account in the name of the minor child and start investing the minor’s income in to this PPF Account.

Editorial Staff at Yourfinancebook is a team of finance professionals. The team has more than a decade experience in taxation and personal finance.