Your Taxes

When during a financial year a minor turns major, what is the correct procedure for computing income for tax purposes?

Can we club the income with the guardian till he turns major and file the rest of his income after the date of his turning a major separately?

Or, considering that the child turned major on December 3, 2014, should we treat the child's income separately for the entire financial year ended March 31, 2015?

Sudhin Bathija

According to the provisions of Section 64(1A) of the Income Tax Act, any income of a minor child which is received or accrued during a financial year (FY) will get clubbed in arriving at the total income of the parent or guardian (if any) who has a higher income.

However, such clubbing provision would be operative only till such time the child attains majority (18 years of age).

There are no clear guidelines on the applicability of the above clubbing provisions for the year the minor attains majority.

In the absence of such directions, one could take a beneficial view and offer the entire income for tax in the hands of the minor rather than split the same and apply clubbing provisions till the date the minor turned a major.

My son is employed abroad. He earned an income of about ₹3.1 lakh in India during financial year 2014-15. He has paid a sum of ₹91,000 towards interest and a sum of ₹1.09 lakh towards principal for a housing loan he has taken from a bank. Hence, he has no tax liability.

Does he need to file returns for FY2014-15? If he does not file the returns, what is the penal provision? Does he have to file Form 15G for not deducting tax from his income?

K Ramachandran

Your son’s taxable income (after setting off house property interest and claiming deduction u/s 80C) will be less than the basic exemption limit of ₹2,50,000. Hence, he would not be required to file a tax return for 2014-15.

However, your son could file a tax return for other reasons (such as availing the loan, visa, etc.) despite the requirement not being mandated by the tax regulation. Since there is no requirement to file a return, penal provisions would not apply.

From the facts, we understand that your son is employed abroad and hence may qualify as a non-resident for tax purposes in India. As per law, Form 15G can be given only by residents of India.

Hence, he would not be able to furnish the same for non-deduction of taxes. However, he could obtain a certificate of “NIL” tax deduction at source from the jurisdictional tax officer.

The writer is Partner, Deloitte Haskins and Sells, LLP. Send your queries to taxtalk@thehindu.co.in

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