Section 10(32) of the Income Tax Act provides a modest exemption when a minor child’s income is clubbed with that of a parent under Section 64(1A).
When It Applies:
- If a minor child earns income (e.g., interest, rent, dividends) and it is clubbed with the income of the parent (typically the one with higher income), then Section 10(32) kicks in.
What’s Exempt:
- The lower of:
- ₹1,500 per minor child, or
- The actual income clubbed, is deducted from the parent’s total income.
> This exemption is available per minor child, and for a maximum of two children.
Exceptions (When Clubbing Doesn’t Apply):
- If the minor earns income from:
- Manual work, or
- Skill-based activities (like acting, singing, coding, etc.), then the income is taxed in the child’s hands, and Section 10(32) is not relevant.
Example:
Let’s say Mr. Rao’s 12-year-old daughter earns ₹8,000 in bank interest. This is clubbed with Mr. Rao’s income under Section 64(1A). Under Section 10(32), he can claim an exemption of ₹1,500, and only ₹6,500 is added to his taxable income.
