CLUBBING OF INCOME

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This discussion clarifies the rules around clubbing a minor child's income with their parents' earnings for tax purposes. Generally, interest income earned by a minor from assets gifted by parents is clubbed with the higher-earning parent's income, after a small deduction. However, if the income arises from the child's own skills, clubbing provisions do not apply. The deduction of £1,500 per child is available regardless of the source of the minor's income.

Teerth

Teerth (Querist)

22 June 2020 Hello all,
A person say Mr. X and his wife say Mrs. Y are filing regular income tax return each year. Each are having separate income of their own. They have child Mr. A who is just 3 years old. They have executed Bank Account and FD Account in the name of Mr. A and there is regular source of Interest Income generated in the name of Mr. A. Now Income generated in the name of Mr. A should shown in which form under Income Tax. Also whether the Income of Mr. A shall be clubbed with the income of their Parents? If Yes, than under whom shall it be clubbed i.e. with the Income of Mr. X or Mrs. Y.?
Please Guide..

CS Advocate Abhishek Goyal

CS Advocate Abhishek Goyal (Expert)

22 June 2020 1. Yes as per clubbing of income provisions income of minor child subject to deduction of Rs 1500/- per child should be clubbed with the income of parents.
2. it shall be clubbed with the income of that parent whose taxable income is higher before including such clubbed income.
3. If income of minor includes income derived by personal skill then clubbing provisions does not apply.

Message likes : 2 times

Teerth

Teerth (Querist)

22 June 2020 Okay got that.. Thank you so much CA Abhishek Goyal Sir.

c.bakshi

c.bakshi (Expert)

23 June 2020 I AGREE WITH ALL THE POINT EXCEPT POINT NO. 1 BECAUSE THE SOURCE OF INCOME IS NOT OF THE MINOR CHILD, SO DEDUCTION OF 1500 NOT TO BE CLAIMED.

CS Advocate Abhishek Goyal

CS Advocate Abhishek Goyal (Expert)

23 June 2020 Section 10(32) reads as: in the case of an assessee referred to in sub section (1A) of section 64, any income includible in his total income under that sub section, to the extent such income does not exceed one thousand five hundred rupees in respect of each minor child" the section is self explanatory, it nowhere specifies that deduction of Rs 1500 is available only if source of income belongs to minor child.

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