Income Tax Rules for Child Earnings: Children are earning a lot of money through these methods these days. Just like tax is collected from an adult according to his earnings. Is there any tax liability on the earnings of children as per the income tax slab?
Income Tax Rules: Nowadays, in the era of YouTube, Facebook, Instagram, even children are earning lakhs. By the way, in our country, making children work i.e. child labor is considered illegal. But these methods do not come under child labor. Children are earning a lot of money these days through these methods. Just like tax is collected from an adult according to his earnings. Is there any tax liability on the earnings of children as per the income tax slab? Let us know what is the rule of tax on children’s earnings.
Children have two types of income
First of all, we have to understand that a child can have two types of income, Earned and Unearned Income. Income that the child has earned himself is called Earned Income. Like the child has earned money with the help of his YouTube page, Instagram account or any talent hunt show.
The second income is that which the child has not earned himself, but he has the ownership right on that income. This is called unearned income. For example, if any property, shares or any other investment is made in the name of the child, then the income that the child gets from it will be considered unearned income.
What is the income tax rule on children’s earnings?
Section 64(1A) of Income Tax says that if a child earns, he does not have to pay tax on his own earnings. According to the tax slab of the parents, it is decided whose income will be clubbed with the child’s income. Then the parent in whose income the child’s earnings are clubbed with has to pay income tax according to the prescribed tax slab.
No tax will be levied on earnings up to Rs 1500
According to Section 10(32) of Income Tax, if a child earns up to Rs 1500 every year, then no tax is levied on it. That is, his earnings are tax free. If the child earns more than this every year, then the earnings above this are considered taxable by clubbing them with the income of his parents under Section 64(1A).
If both the parents earn, then whose income will the child’s earnings be clubbed with?
If both the parents of the child earn, then tax is calculated by adding the child’s income to the income of the one who has higher income. If a child wins a lottery, then 30% TDS is deducted directly on the winning amount. A 10% surcharge is levied on this TDS and 4% cess is also to be paid.
What happens if the parents are divorced?
If the child’s parents are divorced, the child’s earnings are clubbed with the income of the parent who has custody of the child. If the child is an orphan, ITR can be filed in the name of the child.
If the child is suffering from any disability mentioned in Section 80U and the disability is more than 40%, then the child’s earnings are not clubbed with the income of his parents.
