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September 11, 2020

Do minors have to file Income Tax Returns?

by CA Shivam Jaiswal in Income Tax

Do minors have to file Income Tax Returns?

Even though the government has banned child labor under the Child Labor (Prohibition and Regulation) Act, 1986 which is applicable to all children until the age of 18 years, minors can earn income from various sources in India. When a child (a minor) works in any possible way, then the income of the child is considered to be a taxable one.

If a minor works in any possible way, then the income of the child is considered to be a taxable one. For instance, if he/she uses his/her special talents on any shows or wins or if he/she does any activity/job which is considered as legal, then in such cases, the minor is supposed to file an income tax return. For instance, in a very popular TV show, a child wins the title and an amount then the child will have to pay taxes for it.

What do you mean by a minor?

In India, a minor is referred to as someone under the age of 18. As per section 3(1) of the Indian Majority Act 1875 every person domiciled in India shall attain the age of majority on completion of 18 years and not before.

Can a minor have a PAN card?

Yes, a PAN (Permanent Account Number) can be applied for a minor

What does clubbing means?

In general any individual pays tax for money earned by him. Clubbing applies to some of the special scenarios where taxable assets of another entity are combined with a person’s own taxable assets. Hence, he is responsible to pay tax for both the parties.

Do minors have to pay taxes?

Under section 64(1A), any amount that is received by a minor will be included in the income of their parents and the taxes on that income will be the same as the tax on parent’s income.

If the minor’s income per month is less than Rs 1,500, it will not be added to the parent’s income. If the minor’s income is greater than Rs 1,500 per month then the parents will have to pay tax on that income and that income will be treated as parent income. The parent can claim an exemption of Rs 1,500 for each minor child (maximum 2 children) whose income is clubbed.

Under section 64(1) income tax of a minor includes:-

  • Step Children
  • Adopted Children
  • Minor married daughter

There are certain rules for including minor’s income to his/her parent’s assets:-

  • If both the parents are receiving income, then the income of the minor will sum up with the parent’s income and especially to the parent whose income is greater.
  • In the case of divorced parents, the income of the minor is added in the income of the parent who has custody.
  • If the minor is an orphan, then, in this case, a separate income tax return is needed to be filed. A guardian can’t get the salary inclusion benefit from this.
  • If a child is disabled, then the income of a child will not be added with the income of the parent under Section 80U of the Income Tax Act 1961. A child is considered disabled when the minor has more than 40% disability due to diseases like mental illness, locomotor disability, hearing impairment, poor vision, and blindness.
  • If a minor earns any income using his specialized skills, talent, knowledge or manual work, then such income earned will be taxable to the minor himself

What are the applicable slab rates for a minor?

Income tax slabs applicable for minors for FY 2020-21 (AY 2021-22) are as follows:-

Income Tax SlabTax Rate (Existing Scheme)Tax Rate (New Scheme)
Up to Rs 2.5 lakhNilNil
Rs 2.5 lakh to Rs 5 lakh5% (Tax rebate of Rs 12,500 available under section 87A)5% (Tax rebate of Rs 12,500 available under section 87A)
Rs 5 lakh to Rs 7.5 lakh20%10%
Rs 7.5 lakh to Rs 10 lakh20%15%
Rs 10 lakh to Rs 12.5 lakh30%20%
Rs 12.5 lakh to Rs 15 lakh30%25%
Rs 15 lakh and above30%30%

Can a minor file Income Tax Returns?

There is no specific age limit to file income tax returns for children. Age does not matter, but their income does. Income tax returns are calculated based on the minor children’s savings money, their investment income or income earned from jobs, acting jobs, winnings from shows and so on.

If the income of the minor is not clubbed in the hands of his/her parent, then they will have to file income tax returns. As mandated the minor with income can report to the authority by filing the Income Tax Return in prescribed form through the following modes:

  • In the minor’s ITR; or
  • In the income of either of parents who has a higher income.

Who can sign the ITR on behalf of a Minor?

Section’s 140, 159, 160 etc. of the Income Tax Act, 1961 envisages many situations where a person would not able to attend to their Income Tax related affairs on their own. In such cases their guardian or any other competent person can act on their behalf with specific authorization. For a minor, the Guardian or Manager who is managing the affairs of such person may be registered as their ‘representative’

If Guardian or Manager of the minor meets the requirements, they will have to register as a ‘representative assessee’ by logging in to the income tax website and uploading the specified documents to prove your credentials. Once your request is approved and you are registered, they can file the returns of the minor you are representing.

Minor’s who want to file their income tax return will have to have some basic documents with them which are as follows:-

  • PAN Card
  • Income details i.e., cash received, cheque received, cash deposits in a bank
  • Details of savings i.e., fixed deposits interest, savings interest, contribution in funds and so on
  • Active Mobile & Email ID.
  • E- filing portal login details
  • Updated Bank Details (Name, IFSC Code & Account No.).

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