Do I have to pay taxes if my minor child earns income?

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If your minor child is gifted and earns through his hobbies or competitions, will this income be tax exempt? If not, who pays income tax? What if he’s racked up a lot of money in gifts from relatives, or if the investments you’ve made in his name are paying off? Does he have to file tax returns? Find out the answers about your kids’ money and its tax implications for you and them.

1.What are the types of income for minors?

Any money received by a minor child can be classified into two types: earned and unearned. If a child earns it as prize money by participating in competitions, shows, and sports, or through their own business, venture, or part-time job, it will be considered earned income. If, on the other hand, he raised funds in the form of donations from family members, relatives or friends, this will be considered as unearned money. This will also include interest he earns through savings bank accounts, fixed deposits, or other investments that have been made in his name by his parents.

2.
Is income tax due on the income of a minor?

Yes, under Section 64(1A), any money received by a child under 18 will be associated with the parents’ income and taxed at the applicable rates. If both parents earn, then the minor’s income will be assessed along with that of the parent with the higher income. However, a tax exemption of 1,500 ` per child and per year for a maximum of two children is available to parents with income from minors. The parents will pay the minor’s income tax with their taxes.

3. Are there exceptions to revenue bludgeoning?

If the minor child is an orphan, that is to say both parents are deceased, his income will not be associated with that of the guardian, but a separate tax is paid and tax returns are also filed separately. Similarly, any income of a minor, who suffers from certain types of disabilities listed in section 80U, will not be associated with that of the parent. Disabilities must be greater than 40% due to illnesses such as hearing impairment, blindness, mental illness, locomotor disability, etc. If the parents are divorced, the income of the minor will be associated with that of the parent who has custody of the child. The income bludgeon also applies to stepchildren and adopted children.

4.Who files minors’ income tax returns?

Since there is no age limit for filing tax returns, a minor must file tax returns on their income, but their parents can also do it for them. If the returns are filed by a guardian or someone managing their affairs, they will need to upload the relevant documents proving their credentials to the income tax website. He can then file the minor’s tax returns as an “assessed representative”.

5. Can a minor child have a PAN card?

Yes, a minor can have a PAN card and their parents or guardian can apply for it. In fact, if the minor’s tax returns are filed independently, he or she will need to have other information such as bank details, income details, mobile number and email account, as well as the income tax portal username and password, etc.


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Disclaimer:
Advice in this column is not from a licensed medical professional and should not be construed as psychological advice, therapy, or medical advice. ET Wealth and the author will not be responsible for the outcome of any suggestions made in the column.

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