Overview
In India, a minor child’s earnings are often clubbed with the parent’s total income for tax purposes, unless specific exceptions apply. This guide explains when clubbing happens and how the tax is computed.
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When clubbing applies
Clubbing occurs when a minor earns income from assets or funds owned by the parent, or from the parent’s investments. In such cases, the income is included in the parent’s tax return and taxed at the parent’s slab.
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Exceptions that let the child retain separate taxation
- Income from manual work performed by the minor is not clubbed with the parent’s income
- Scholarships, fellowships or educational awards received by the minor are not clubbed
- Income arising from sources independent of the parent’s assets or funds, such as income earned directly by the child from their own enterprise, may be taxed in the child’s hands
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How tax is determined
If clubbed, tax is calculated as part of the parent’s income using their individual slab. If not clubbed, the minor’s own tax liability is calculated according to the minor’s applicable slab, if any, and standard reliefs allowed for dependents or education-related deductions as permitted.
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Practical tips: maintain separate records of the source and ownership of the funds, avoid intermingling parental funds with child earnings, and consult a tax adviser to ensure correct filing of ITR based on your family’s structure.
