HI Shri,
My query is related to investments that are done in the name of minor GIRL child:
There can be two kinds of investments - taxable (like bank fd) and non taxable (like ppf, Mutual funds). Could you please provide your inputs for following queries:
- For taxable instruments, once child becomes adult, the accumulated corpus is considered as that of the child and future return on that corpus is considered as child's income?
- For non taxable instruments, once child becomes adult, the accumulated corpus is considered as that of the child and she can withdraw that accumulated corpus and invest in some other taxable instruments? Return from these investments are then considered as income of child?
4 Answers
Hi,
Is n't both the above queries mean same? Am I missing something here?
The gains/income generated on investments made in the name of minor child, are clubbed to the income of kid's parent, and taxed accordingly.
Once the kid attains 18 years, such income will no longer be clubbed.
Yyour major child, who may or may not be earning, and if the major child invests that money any income from these investments will not be taxable in your hands but will be taxed in the hands of the major child. There will be no clubbing of income in case of a major child.
Thanks for your response.
Yes, intent of both the queries was same.I have segregated them separately just to see of there is some different treatment for taxable and non taxable investment instruments. As per your response, it seems it is a good idea to open a account in the name of minor child and continue investing from there. Once child becomes adult, returns from the accumulated corpus can be shown in the return of major child and parent can save some tax here
True.
Kindly note that if the income generated by the investments made in Minor Child's name is non-taxable income, such income is tax-exempt.
For ex: A parent can invest in PPF in minor Kid's name, though the interest income on PPF is clubbed, it is tax-exempt, because interest income on PPF a/c is a non-taxable income.
Same, is the case with say ELSS tax saving mutual fund.
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