A young boy is earning millions from YouTube, but whose name will the income appear in his ITR? Learn about the Income Tax clubbing rules..

Nowadays, children are no longer limited to just studies. Be it Instagram Reels, YouTube videos, or TV reality shows—children are showcasing their talents everywhere and earning a lot of money. But as soon as income is discussed, the question of income tax arises. Does a 10-year-old child have to pay taxes? Will they also have to file ITR? The Income Tax Department has established very clear rules for the income of minors. Let's understand them in detail in simple terms.

The child is earning, who will pay the tax?
If a minor child earns through YouTube, reality shows, or any other means, the question arises: Who will pay the tax? The answer to this is clearly spelled out in the Income Tax Act. Under different circumstances, sometimes the parents will pay the tax, and sometimes the child himself will pay the tax.

What is earned and unearned income?
A child's income can be of two types: earned, i.e., income earned through one's own hard work, and unearned, i.e., income from gifts, investments, or property.

Which category does social media income fall into?

If a child earns money through YouTube, Instagram, talent shows, or acting, it is considered earned income.

Gifts and FD interest are also income.

If a child has an FD, investment, or property in their name and receives interest on it, it is considered unearned income.

What does Section 64(1A) say?

According to Section 64(1A) of the Income Tax Act, a minor's income is added to the parents' income. This is called "clubbing of income."

Whose income will be added to?
The child's income will be added to the income of the parent with the higher income, meaning the one already subject to higher taxes.

₹1500 relief
Under Section 10(32), each child's income is exempted up to ₹1500. The remaining amount is added to the parents' income.

Understand the rules with an example:
If a child earns ₹60,000 in interest from an FD, then ₹58,500 will be added to the parent's income after subtracting ₹1,500.

When will the clubbing rule not apply?
If the child has earned money through their own hard work, talent, or skill, the clubbing rule will not apply.

Earnings from singing or acting?
If the child earns from reality shows, sports, acting, or art, their income will be considered separate.

What if they win the lottery?
If a minor wins the lottery, 30% TDS will be deducted directly, along with a surcharge and cess.

What if they divorce?
If the parents are separated, the child's income will be added to the income of the parent who has custody of the child.

Also, understand the case of orphaned children:
If the child is orphaned, they will have to file their ITR themselves (through a guardian).

How is a child's ITR filed?
Where a child is required to file their own ITR, a guardian files the return on their behalf. This requires the child to have a PAN.

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