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Income of a Minor Child - How & when clubbed??

Investments in the name of a minor child are quite common, but are we aware of the tax implication of income of minor child from such investments or otherwise? Many a times we have income in the name of our minor child and we feel as this income is of a minor, it will not be taxed. But its not true, there is a provision to club the income of minor child in the income of the parent. Lets understand how??

Clubbing of minor's income:

As per Section 64(1A) of the Income Tax Act, income of a minor child shall be included in the income of parent. Here income will be included in the income of the parent whose total income is higher.

Exceptions to the rule of clubbing of minor's income:
Income of minor child is not clubbed to the income of the parent in following cases:
  • When the child is suffering from a disability of the nature as specified in Section 80U;
Click here to know the disabilities as per Section 80U
  • If the income of the minor child is earned by reason of: 
    • manual work done by the minor child; or
    • an activity involving application of minor child's skill, talent or specialised knowledge and experience
Exemption to the income of minor upto Rs. 1500 per annum:
According to Section 10(32) of the Income Tax Act, an amount upto Rs. 1500 per annum, per minor child is exempt from tax and therefore not to be included in parent's income. This exemption of Rs. 1500 is available only for two minor children.

Other points:
  • Income of the year in which minor child become major ie. attains the age of 18 years, shall not be clubbed as the child is major at the end of that financial year.
  • If the marriage of the parents do not subsist, the income of the minor shall be included in the income of the parent who maintains the minor child in that year.

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Invest for your minor girl child to save tax - Sukanya Samriddhi Account Scheme

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