Minors can earn income independently through various means without it being taxed under their parents' income. Income-tax rules provide certain exceptions where the child's income is not clubbed with the parent's income, preventing the parent's taxable income from increasing while allowing the minor child to claim applicable tax benefits. According to Mint, any person under the age of 18 is considered a minor, and income earned through their own skills, talent, specialised knowledge, or manual work is taxable in the minor's own hands and is not clubbed with the income of their parents as per the Income-tax Act.
Income earned by a minor through their own skills, talent, specialised knowledge, or manual work is taxable in the minor's own hands and is not clubbed with the income of their parents. For example, if a minor earns ₹2 lakh through acting assignments, that income may qualify for the exception if it arises from the child's own talent and efforts. As reported by Mint, the income is taxed according to normal tax slab rates, with the return filed in the minor's name through a parent or legal guardian acting as the representative assessee. The deadline to file ITR for minors is the same as other taxpayers.
If a minor earns income from savings in a bank account or fixed deposits, or from investments made in their name by the parents, it will be taxable in the parent's hands. According to Mint, as per Section 64(1A) of the income tax act, any income that accrues or is paid to a minor is generally clubbed with the income of the parent who has higher taxable income. The income is then taxed in the hands of that parent as though it were their own income. However, an important exception applies to minors with disability specified under Section 80U of the income tax act, where the child's income is not clubbed with the parent's income.
If a minor's income is less than ₹1,500 in a financial year, the entire amount is exempt from income tax. As reported by Mint, in such cases, the parent can claim an exemption of ₹1,500 for each minor child whose income is clubbed under section 10(32) of the income tax act. However, if the minor's income exceeds ₹1,500, only that portion of the amount can be claimed as an exemption while filing ITR, and the remaining balance remains taxable in the parent's hands. The exemption threshold applies to minors with disability as well, provided they have more than 40% disability including blindness, poor vision, hearing impairment, loco motor disability, and mental illness.
