Minor’s Income
Minor’s Income refers to income earned by a child below 18 years of age. Under the Income Tax Act, such income is generally clubbed with the income of the parent and taxed accordingly.
This provision prevents misuse of a minor’s status for tax saving.
1. Clubbing of Minor’s Income
- Income of a minor is added to the income of the parent with higher income
- Taxed at the applicable slab rate of that parent
This is known as the clubbing provision.
2. Exception to Clubbing
Clubbing does not apply if the minor earns income from:
- Manual work (e.g., child artist, sportsperson)
- Own skill, talent, or specialized knowledge
In such cases, income is taxed in the minor’s own hands.
3. Exemption Available
- An exemption of ₹1,500 per child per year is allowed
- If income exceeds ₹1,500, only the excess is clubbed
4. Types of Minor’s Income
- Interest income from bank deposits
- Income from investments made in minor’s name
- Gift income (subject to tax rules)
These are typically subject to clubbing.
5. Filing of Return
- If minor’s income is clubbed → included in parent’s ITR
- If taxed separately (exception cases) → minor may need to file ITR
6. Common Mistakes
- Opening investments in child’s name assuming tax saving
- Not clubbing income with parent
- Ignoring ₹1,500 exemption
- Misunderstanding exceptions
Practical Insight
Most people invest in a child’s name thinking it saves tax.
It doesn’t.
Unless the income comes from the child’s own talent or effort,
it gets clubbed back.
So real planning isn’t about shifting income,
it’s about structuring investments correctly.
How N D Savla & Associates Can Help
At N D Savla & Associates, we help you:
- Apply clubbing provisions correctly
- Plan child-related investments efficiently
- Ensure accurate reporting in ITR
