Upgrad LLM

income on minor


My  cousin sister (widowed)   with two kids.  Her father-in-law deposited Rs.15,00,000/- in the name of minors and she is the guardian.  Whether the income will be treated her income or the income of minor?  If she considers not getting the interest, can she be called dependant on my cousin brother for the purpose of medical and other benefits from his brother who is a Govt.Servant.

 
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Advocate

If the person age below 18 is considered as minor and he/she is not eligible to submit the income tax under the Indian Income tax act except certain exceptional cases. If a minor is earning income, then it will be clubbed with his guardian or parents income and will be paid tax for the amount.

Normally, the income of any minor is clubbed in the hands of either of his parents and, therefore, the minor need not file the return and hence PAN is not required. There are some exceptions.

All the income of a physically or mentally handicapped minor child will be directly assessed in the hands of the child. Similarly, a minor earning income by way of manual work or an activity involving application of his skill, talent or specialized knowledge and experience, is directly assessed in the hands of the child.

Section 64(1A), which provides for clubbing of the income of a minor child with that of the parent, provides that where the marriage of the parents subsists, the income of the minor child is to be clubbed in the hands of the parent whose total income is higher and further that once the income of a minor child is clubbed in the hands of one parent, the same is to be continued to be clubbed in the hands of that parent unless the assessing officer after giving an opportunity of being heard to the other parent is satisfied that the income needs to be clubbed in the hands of that other parent.

 

 

Besides clubbing of income of minor-children in the hands of the parent, certain other incomes are also liable to be clubbed in the hands of the individual in the following circumstances:-

a) When   the  income  arises  to  the   spouse   of such individual from assets transferred directly or indirectly to the spouse by the individual for inadequate consideration.

b) When the income arises to the son's wife from assets, transferred after 1st June 1973, to the son's wife by the individual for inadequate consideration.

c) When income arises to the son's wife from assets transferred, for    inadequate consideration, by the individual to such person for the benefit of   the individual's wife or son's wife.

The exemption limit is Rs.1500 per child in a year.

 


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Chartered accountant

Dear Ramakrishnaraju,

                                                 The incomeof the minor from the deposit shall be his own separate income. Under Sec 160 of the Act that income will be assessed separatly on the representative assessee ie his mother. She is liable to pay tax and file returns using her own PAN as if she is the assessee.Probably she may have to file two returns .First One for her own income and the Second for the income of the minor. This is my understanding of the law.

 

 

siva208@yahoo.com


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Director

Dear Mr Raju

For Income Tax purposes, the interest income of minors shall be clubbed with mother unless the case is covered by exception i.e. minor child suffering from diseases covered u/s 80U.

 

For claiming medical and other allowances from Governement, please refer to respective government rules. In my opinion, the interest income oes not belong to mother but being taxed in her hand by fiction of law. Therefore she can escape the income criteria of dependancy test under Government Rules.

 

Interestingly, in this case Revenue authorities may take another stand by clubbing the interest income in hands of grandfather as the income being earned is indirectly accruing and clubbed in hands of daugher in law from the funds transferred by Father in Law without any consideration.


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Given  the fact, whether any  Notary Public will be signing in the Affidavit of  my cousin that she is getting less than Rs.3,500/- per month from all sources of income for the purpose of medical benefits in the Central Govt.

 
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Advocate

I suggest you to take a proper income certificate from a tahsildar/MRO/RDO as the case may be.


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