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At what rate is the minor's income taxed when clubbed

venky (student) (41 Points)

22 September 2016

A Minor has short term capital gaintaxable u/s 111A at flat 15% and also long term capital gain taxable at 20% flat.

This Income when clubbed in the hands of the parent,

will it be included in parent's other sources and taxed at parent's slab rates

(or)

will it continue to be included in parent's capital gains and taxed at the same flat rates viz. 15% and 20% respectively?

And if it is included in parent's other sources, how can you claim indexation benefits?

And if it continues to be taxable at the same flat rates, how should you show it in the return of the individual?

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2 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (193823 Points)
Replied 22 September 2016

As per the decision of Kolkata Tribunal Bench in case of Deputy Commissioner of Income-tax v Rajeev Goyal & Others, IT Appeal Nos. 951 & 963 (Kol.) of 2011), the income of minor is clubbed with parent on net basis.The Kolkata Bench said that even if the income of the minor is clubbed with the income of the parent, all the deductions are to be allowed while computating the income of the minor and only the net taxable income is to be clubbed under section 64.

As per decision of the Bangalore Bench of the Income Tax Appellate Tribunal in the case of Bajaj Ashok Chunnilal, wherein it was held that “unless and until the income of the minor child is computed, the clubbing provision will not apply”.

Needless to say that the income of minor will be clubbed with higher earning parent under the same head.