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Income Tax Liability for minors: Everything you need to know

Even though the government has banned child labor under the Child Labor (Prohibition and Regulation) Act, 1986 which is applicable to all children until the age of 18years, minors can also earn income from other sources.

Other than salary from employment, Minors can receive an income from savings in a bank account, fixed deposits or other investments made in their name by the parents.

The question is do minors have to pay taxes?

The answer is yes, under section 64(1A), any amount that is received by a minor will be included in the income of their parents and the taxes on that income will be the same as the tax on parent’s income.

Minors are any individuals who are below 18 years of age. Minors can receive an income from various sources such as savings from fixed deposits or from interest earned on bank accounts or any other investments in their name.

If the minor’s income per month is less than Rs. 1,500, it won’t be added to the parent’s income. If the minor’s income is greater than Rs. 1,500/- per month then the parents have to pay tax on that income and that income will be treated as parent income.

There are certain conditions on tax on minors’ income depends upon the situation of father and mother. These conditions are listed below:

  • If both the parents are receiving income, then the income of the minor will sum up with the parent’s income and especially to the parent whose income is greater.
  • In the case of divorced parents, the income of the minor is added in the income of the parent who has custody.
  • If the minor is an orphan, then, in this case, a separate income tax return is needed to be filed. And it is not clubbed with the guardian’s income.

There are a few exemptions. If a child is disabled, then the income of a child will not be added with the income of the parent under Section 80U of the Income Tax Act 1961. A child is considered disabled when the minor has more than 40% disability due to diseases like mental illness, locomotor disability, hearing impairment, poor vision, and blindness.

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