If the child is disabled and has visual, hearing, walking or any mental disorder as listed under section 80U of Income Tax, their income will not be added to the income of the parents.
Investment For Minors: Whether it is a matter of children’s education, especially higher education, whether it is a matter of securing their future or the marriage of a daughter… Investing in the name of children can avoid possible stress and anxiety in the future. Be it Sukanya Samriddhi Yojana, post office recurring deposit or PPF, mutual funds… there are many investment options where investments can be made in the name of children.
Many people invest for the security of the better future of their children. Maybe you too have invested in the name of children or are going to do so! But do you know that income tax is also paid for children? At the same time, if they do not pay tax, then how will the income earned from these investment options be taxed?
Income of parents will be considered
Earnings on investments made in the name of the children will be counted in the income of the parents. Under Income Tax Section 64(1A) only the parent will have to pay tax on it. A child is considered a minor until he is 18 years old. Whether it is a savings account in the name of the child, fixed deposit or any other investment, they earn income on these.
If both the parents earn then the income of the child will be added to the one whose income is higher. If the parents are divorced, then this income will be added to the income of the one who has the custody of the child.
The child won the competition and got the money?
Suppose a child has won a competition with his talent. If he has won a TV show or has earned his income in any other way, then the child will have to pay income tax separately. If you want, you can also get a PAN card made for minors, which is considered necessary for filing returns.
Deduction under 80C
Note that parents can also claim deduction under Section 80C available on these investment options – such as exemption on Sukanya Samriddhi Yojana, PPF, 5-year term deposits, etc. But, this limit remains only one and a half lakh rupees as both the incomes are clubbed. Rest of the tax rules remain as per the investment option.
Tax exemption on investment made for children
If the income from investments made in the name of the child is less than Rs 1,500, then it is not clubbed with the income of the parents. At the same time, when this income is clubbed with the parents, then the parents can claim an exemption of Rs 1,500 on the investment made in the name of each child.
Wherein, if the child is handicapped and has visual, hearing, walking or any mental illness as listed under section 80U of Income Tax, then their income will not be added to the income of the parents.
