Income Tax Rule: Who will pay the income tax if the child earns? Know what the Income Tax Department's rule says.
Income Tax rules for child income: Child labor is banned in India. But still, there are many ways like content creation, talent shows etc. through which children can also earn 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 compensate for it? Know what the Income Tax Department's rule says about this?
A minor can have two types of income. The first is the earned income, which he has earned himself and the second is the income which he has not earned, but the ownership rights are with the child. 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 as his unearned income. If the parents make any investment in the name of the child the interest received on it is also considered as the unearned income of the child.
Section 64 (1A) of the Income Tax Act explains 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.
Under Section 10 (32), the child's annual income up to Rs 1500 is kept out of the scope of tax. The income above this is added to the income of his parents under Section 64 (1A).
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 of TDS will be deducted directly on it. Then 10 percent surcharge will be levied on this TDS and 4 percent cess will also have to be paid.
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 the 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 parents' income.
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