Basic Rule
Under Section 64(1A), all income of a minor child (below 18 years) is automatically clubbed with the income of:
- The parent whose total income is higher(before clubbing)
- Exception:Income earned by the minor through their own skill/talent
What Income Gets Clubbed?
| INCOME TYPE | CLUBBING STATUS |
| Interest from fixed deposits (gifted by parents/relatives) | ✅ Clubbed |
| Dividend from shares gifted by family | ✅ Clubbed |
| Rental income from property transferred to minor | ✅ Clubbed |
| Income from business where minor is nominal partner | ✅ Clubbed |
| Earnings as child artist/athlete (own skills) | ❌ Not clubbed |
| Scholarship for education | ❌ Not clubbed |
Exemption Allowance
- ₹1,500 per minor childdeduction is allowed
- Maximum for two children(₹3,000 total)
- Deducted from clubbed income before adding to parent’s income
Example Calculation:
- Minor’s FD interest: ₹10,000
- After exemption: ₹10,000 – ₹1,500 = ₹8,500 added to parent’s income
Special Cases
- Divorced Parents
- Income clubbed with the parent who has custody
- Adopted Children
- Treated same as biological children
- Step-Children
- Covered under this provision
How to Avoid Clubbing?
- Invest in Child’s Nameusing:
- Sukanya Samriddhi Scheme (exempt under Section 10)
- PPF (interest tax-free)
- Encourage Skill-Based Income
- Modeling, sports, arts etc. (not clubbed)
- Use Grandparent’s Gifts Carefully
- Income from assets gifted by grandparents is still clubbed
Tax Planning Tips
✔ Best Option: Invest in tax-free instruments in child’s name
✔ Partial Solution: Spread gifts across multiple children to use exemption
✔ Avoid: Large fixed deposits in minor’s name from parental funds
