Income Tax Rules: If the child earns, who will pay the tax? Understand what the rule says..
Child labor is considered illegal in our country, but today there are many such means through which children can earn a lot of money. From the talent shows on TV to platforms like YouTube and Instagram, children are earning a lot of money. But if any kind of tax liability arises on the earnings of these children according to the income tax slab, then will the child have to pay it or his parents? Know here what the Income Tax Department's rule says about this.
First, understand the difference between earned and unearned income.
A minor can have two types of income. The first is 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 his unearned income. If the parents make any investment in the name of the child the interest received on it is also considered the unearned income of the child.
What does the law say
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.
Earning up to Rs 1500 is tax-free
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 the child's parents under section 64(1A).
If both parents earn 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 a lottery, then 30 percent of TDS will be deducted from it. Then a 10 percent surcharge will be levied on this TDS and a 4 percent cess will also have to be paid.
What will happen 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 the custody of the child. Apart from this, if the child is an orphan, then he will have to file his ITR himself. At the same time, 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.
