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Taxability Of Income And Wealth Of Minor On Completing 18

From the wealth tax perspective, it is important to note that the clubbing provisions shall still be applicable and the parent shall be subject to wealth tax in case where the asset has been transferred to a minor child without any consideration

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Under the Income tax regulations, minors below the age of 18 years are treated as non-taxable assessees whose income are clubbed with that of either of his parent and who are assessed to tax. Though there are certain exceptions provided wherein the income of minor is taxed in his hands, such as those earned through exercise of own skill or profession or art.

In this context, it is important to ascertain the taxability of minors who attains 18 years of age during the transitionary year i.e. year in which they attain majority. In this context, the minor shall be treated as a major and subject to tax independently, even in the year in which such minor attains the age of 18 years. However, for certain part of the year when he was minor, his income for that proportionate period shall be clubbed with that of his parent and the deduction of Rs. 1500 p.a. on clubbing can be availed by such parent.

Being chargeable to income tax independently, such minor who has turned major, can avail of the basic slab rate exemption which is available upto an income of Rs 250,000 for the later part of the financial year in which he turns major. The benefit of all the investment based deductions as provided under chapter VI A, primarily consisting of section 80C (Life Insurance, Fixed Deposits, ELSS / ULIP, etc investments), sec 80D (mediclaim), etc. shall also be available to such major, while computing the taxable income.

One of the procedural compliance, which is required to be done from Income Tax perspective is the updation of the PAN records of the minor on attaining majority. The PAN of the minor needs to be updated on priority basis by furnishing of the requisition in form 49A as specified. Updation of PAN is a pre-requisition as nowadays furnishing of PAN is mandatory in many of the transactions such as depositing of cash in bank account to purchasing of valuables, above the specified threshold. Also where investments were made in the name of minors in such case, PAN is to be updated on reaching 18 years of age.

From the wealth tax perspective, it is important to note that the clubbing provisions shall still be applicable and the parent shall be subject to wealth tax in case where the asset has been transferred to a minor child without any consideration. However, it is notable that the Wealth Tax Act has been abolished from 1 April 2015 and as such, the provisions shall be relevant only till the financial year ended 31 March 2015.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.


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income tax wealth tax pan

Dr Suresh Surana

The author is Founder, RSM India

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