Last updated: March 3rd, 2020 11:39 AM

Clubbing Income of Minor

Clubbing of income means including the income of any other person in the taxpayer’s total income. Under Income Tax law, specified situations are provided, wherein, the income of one person is statutorily required to be included in the income of another person. Such inclusion of income of one person into the income of another person is called ‘clubbing of income’. Provisions of clubbing of income are contained under section 60 to section 64 under the Income Tax Act, 1961. In this article, we discuss the concept of clubbing income earned by a minor child.

Minor Child Income

As per provisions of Section 64 of the Income Tax Act, the income of a minor child is taxable / clubbed in the hands of the parents whose total income (before including income of minor) is higher. If the natural parent of a minor child parents does not exist, then in such cases, the income of minor would be taxable in the hand of the parent who maintains the minor child in the previous year. Also, the child would include both the stepchild and an adopted child. In case of death of both mother and father, the income earned by the minor cannot be clubbed and hence the minor child is required to file income tax return through his legal guardian. It must be noted that income once included in the total income of either of the parents would continue to be included in the hands of the same parent in the subsequent years, unless assessing officer is satisfied that it is necessary to do so, after giving that parent opportunity of being heard. Finally, if a child attains majority during the previous year, then, part of the income earned by the child during his minor period would be clubbed in the hands of the parents.

When Income Cannot Be Clubbed

In the following situations, minor child income cannot be clubbed in the hand of the parent:

1. Manual work is done by the minor.
2. Activity involving the application of any skill, talent or specialized knowledge and experience on the part of the minor.
3. A child suffering from any disability specified under section 80U.

Investment in Minors Name

As per the Income Tax Act, the income of the minor, which is not clubbed in the hands of parents, if invested somewhere and income is earned from such investment, then, in such cases, the income so earned from the investment would be clubbed in the hands of the parent. For example, a child who is an artist has earned an income of INR 50,00,000/-. Since the income is earned by the child on the basis of own skill, the income will not be clubbed in the hands of his parents. Further, INR 50,00,000/- earned by the child is invested in fixed deposit and interest of INR 50,000/- is earned out of such investment, then, interest income would be clubbed in the hands of the parents whose income is higher.