Income Tax Rules: If the child earns, who will pay the tax? Understand what the rule says.

Today, there are many such means through which children can earn a lot. If any kind of tax liability is created on the child's earnings according to the income tax slab, then will the child have to compensate for it or will his parents? Know what is the rule.

Child labor is considered illegal in our country, but today there are many such means through which children can earn a lot. From all the talent shows on TV to platforms like YouTube and Instagram, children are earning a lot. But if any kind of tax liability is created on the earnings of these children according to the income tax slab, then will the child have to compensate it or will his parents? Here know 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 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 gets 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 child's unearned income.

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 his parents' income. Then the parents have to pay income tax on the total income according to the prescribed tax slab.

Earnings up to Rs 1500 are tax free

Under section 10(32), the child's annual income up to Rs 1500 is exempted from tax. The income above this is added to the income of his 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 one who has higher income among the two. If a minor wins money in a lottery, then 30 percent TDS will be deducted directly on it. Then a 10 percent surcharge will be levied on this TDS and 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 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.