Section I: Income Tax and Your Career

• Ques: Safeguard from clubbing of minor’s income
• Ans: Key points:
  • The income of child is to be added in the income of parent having higher income till the child is minor i.e. below 18 yrs. You can claim up to Rs. 1,500 deduction from minor child's income.
  • If you have kept recurring/fixed deposit with bank or post office in the name of your child, then the interest on deposit will be added to parent’s income.
  • You have to declare and pay tax on child's income within your income tax return. In case your minor child is earning from his/her own capacity, then the minor child can file his/her own return and there will not be any clubbing of income.
  • To avoid clubbing of child’s income, you may invest in tax free instruments such as PPF, MF or ULIP.
  • Gold is another asset where money can be invested as there is no tax on holding gold.
  • Gold can also be used as a security to raise funds for emergency family needs.
  • To buy a house, you can mortgage gold and take a loan. Interest paid on this loan can be claimed as deduction from your house property income. This is specifically useful for house which is not easy to mortgage.
  • Therefore you can reduce your tax liability by purchasing gold as compared to NSC/FD in your child's name.