It is clearly written in the Income Tax Rules that people below the age of 18 are considered minors and they are taxed differently.
When Income Tax Return (ITR) Age is no excuse when it comes to filing. Many taxpayers are not aware that children/minors are earning income, so they have to pay tax and file returns. More than 48,00 minors below the age of 18 years filed their ITR in the financial year 2022-23 till January 31, 2023.
Tax experts say that the children who are earning in India are also required to pay tax on their income like any working person. Abhishek Soni, co-founder and CEO of Tax2Win, tells Financial Express that minors under the age of 18 have to pay tax if they earn their own income.
TaxBuddy founder Sujit Bangar said in a media report that it is clearly written in the Income Tax rules that people below the age of 18 are considered minors and are taxed differently. Minors are not required to file their own tax returns, and their income is clubbed with the income of their parents or legal guardians.
In what situations tax liability of children/minors arises
Money Earned: When children earn money by winning their special skills, like any competition/tournament etc. The amount of salary is also included in this money.
Unearned Income: When the money is not directly earned by the minor but is received in the form of gift from relatives, grandparents, trust income, income from investments held by parents in their name, etc.
When is the income of minors added to the income of parents?
As per section 64(1A) of the Income Tax Act, any amount received by a minor is included in the income of the parent. This is called “clubbing of income”. Thus, taxes on that income will be paid at the same rate as tax on the parents’ income. According to experts, if the income is less than Rs 1500 in a year, then it will be added to the income of the parents, and exemption under section 10(32) will be available on earning up to Rs 1,500. So no tax will be levied in such a case. This income may include interest income, dividend income etc. If the income is more than Rs 1500 in a year, then this income will be considered as the income of the parents, and the parents will have to pay tax here. However, a tax exemption of Rs 1,500 per year per child is available to parents on the income of minors.
When is the income of minors taxed only on them?
According to tax experts, if the income of the minor is more than the basic exemption limit, then tax will have to be paid on the excess amount. According to experts, if a minor is generating income through influencer marketing or other means, then it is considered the responsibility of the parent or guardian to pay tax on behalf of the minor. However, if the income of the minor exceeds the basic exemption limit in a financial year, which is currently Rs 2.5 lakh, then the minor will have to pay tax on the excess amount.
Is it mandatory for children to file ITR?
Yes, it is mandatory if the income exceeds the basic exemption limit. It is necessary to pay tax to earning minors. Minor’s income can be of two types, earned and unearned; In both the cases, there is a need to file ITR following certain rules applicable to earning minors. There is no age limit for filing ITR. If it is unearned income (interest income, gift etc.), the income will be added to the parent’s income and the parent will file ITR. However, if it is earned income, the parent will file ITR on behalf of the minor children as a representative assessee.
: Language Inputs