Income Tax rules for child income: Child labour is banned in India. But still there are many ways like content creation, talent shows etc. through which children can earn money legally. Many children are also earning money in this way. But the question arises that if income tax is made on the income of children according to the tax slab, then will the children have to pay for it? Know what the Income Tax Department’s rule says about this?
These are the ways in which children earn income
A minor can have two types of income. The first is earned income, which he has earned himself and the second is income which he has not earned but the child still has the ownership rights. If the child earns through a competition or reality show, through social media or in any other way, then it is considered his earned income. But if the child receives any property, land, property etc. as a gift from someone, then it is considered his unearned income. If the parents make any investment in the name of the child and the interest received on it, it is also considered the unearned income of the child.
What does the law say
Section 64 (1A) of the Income Tax Act states the rules related to the income of a minor. According to the rule, if a minor earns, he does not have to pay tax. His income is added to the income of his parents. Then the parents have to pay income tax on the total income as per the prescribed tax slab.
Income up to Rs 1500 is tax free
Under section 10(32), a child’s income up to Rs 1,500 per year is exempted from tax. Income above this is clubbed with the income of the parent under section 64(1A).
If both parents are earning then…
If both the mother and father earn, then the tax is calculated by adding the child’s income to the income of the higher income of the two. If a minor wins money in a lottery, then 30 percent TDS will be deducted on it directly. Then a 10 percent surcharge will be levied on this TDS and 4 percent cess will also have to be paid.
What happens in case of divorce
Suppose if the child’s parents are divorced, then in such a situation the child’s income is added to the income of the parent who has custody of the child. Apart from this, if the child is an orphan, then he will have to file his ITR himself. On the other hand, if the child is suffering from any disability mentioned in Section 80U and the disability is more than 40 percent, then his income will not be added to the income of the parents.
