Clubbing of income of a Minor Child with Income of parent

Applicability of clubbing provisions on the income of a Minor Child

♦ The income of minor child will be clubbed in the income of that parent (mother/father) whose total income [excluding the income of the minor child under section 64(1A)] is greater.

♦ In a case where the income of the minor child is once included in the total income of either parent, any such income arising in any subsequent year shall not be clubbed in the total income of the other parent, unless the A.O. (Assessing Officer) is satisfied, after giving an opportunity of being heard to that parent, that it is necessary so to do.

♦ If the marriage of the parents does not subsist then the income of minor child will be included in the income of that parent (mother/father) who maintains the minor child (guardian of the minor child) in the relevant previous year.

♦ Where both the parents of the minor child are not alive, the income of the minor child cannot be assessed in the hands of any other relatives (including grandparents) or even in the hands of a minor.

♦ Where the minor child’s income has been clubbed in the total income of his/her parent, such parent will be entitled to an exemption to the extent of such income or Rupees. 1,500 whichever is less, in respect of each minor child whose income is so included.

Example:

Abhishek is the minor child of Amitabh and Mrs Jaya. During the previous year 2019-20, the income of Abhishek is Rupees. 2,500 (this is the first income earned by Abhishek during his lifetime). During the previous year 2019-20, the income of Amitabh is higher than that of Mrs Jaya. Accordingly, the income of Abhishek i.e. Rupees 2,500 will be clubbed in the income of Amitabh for the previous year 2019-20. In the succeeding years (during the minority of Abhishek), the income of Abhishek will be clubbed in the income of Amitabh, even if the income of Mrs Jaya becomes higher than that of Mr Amitabh in any of the subsequent years.

However, there is one exception to this clause. If in the succeeding year, the A.O. (Assessing Officer) wants to include the income of the minor child (Abhishek) in the hands of Mrs Jaya, it can be done only if it is necessary to do so (not merely in the change in opinion of the Assessing Officer) and that too after giving an opportunity of being heard to Mrs Jaya.

Certain incomes taxed in the hands of Minor Child only:

The following income of a minor child shall not be clubbed in the hands of his/her parents and will be taxable in the hands of the minor himself/herself:

• Any income earned by a minor child who is suffering from any disability specified in section 80U of the Income Tax Act like physically disabled, totally blind, etc.
• Any income earned by the minor child on the account of any manual work done by him/her.
• Any income earned by the minor child on account of any activity involving the application of his/her skills, talent or specialized knowledge and experience.

Exemption under Section 10(32) in case of Clubbing of Income of a Minor Child –

Where the income of an individual also contains the income of his/her minor child in terms of section 64(1A) of the Income Tax Act, such individual shall be entitled to an exemption of Rupees 1,500 in respect of each minor child.

However, where the income of any minor is less than Rupees 1500 then the aforesaid exemption shall be restricted to the income so included in the total income of the individual.

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