Income tax provisions for a teenager in India

Last Updated at: March 24, 2020
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How much can a teenager make before paying taxes. Income tax act

When income tax is filed, the income received by a teenager is included with the earnings of the parent, based on who is earning the highest. The income tax is filed, regardless of the fact, any gift has been given by the parent to the teenager.

As per section 64 (1A) of the income tax act, when calculating the total income of a person, the income accrued by his/her teenager is also included. There are various exceptions to this condition, to facilitate the non-inclusion of a minor’s income with his/her parent.

The inclusion of a teenager’s income or a minor’s income with the parent’s income is only applicable so long as the teenager remains a minor (or below the age of 18). If the teenager attains the age of 18 during a financial year, then the teenager will be treated as major or adult. Hence, the income earned by the teenager cannot be included with his/her parent. However, these rules don’t apply to teenagers suffering from any disability, as per section 80U of the income tax act.

File Your income tax now

As per section 10(32) of the Income-tax act, there is a provision for not including a teenager’s income with his/her parent. This for minors who earn less than Rs.1500, per month, per minor, up to a maximum of two children. 

Therefore, the minimum exempted income for minors or teenagers at all times is Rs. 1500/- which means, a teenager can only enjoy this much earnings without filing for income tax or including it with his/her parent’s income. However, this rule is also applicable to the amount transferred by a parent, uncle, grandparent, etc, it has to be less than Rs. 1500 a month, in order for it to be tax-free.

Also, as per the provisions of section 64(1A) of the income tax act, there other exceptions that do not allow for the income of teenagers or minors not be included with the parent’s income, or income accrued. These provisions pertain to

  • Physical task executed by the teenager.
  • Tasks executed via the teenager’s skill, talent, knowledge or experience.

Now let’s consider an example. If a teenager aged 15 who is skilled in computer programming, executes tasks based on this skill or knowledge then that income will be considered as income earned as per tasks executed via the teenager’s skill, talent, knowledge or experience. Hence, the income earned or salary earned cannot be included with the income of the parent. 

Conditions for non-inclusion of teenager’s income with his/her parent

Now, for income tax return filing, if the teenager does not earn income through physical work, or tasks executed via the teenager’s skill, talent, knowledge or experience, then the following conditions can be availed or followed by the teenager or parent, to avoid including the teenager’s earnings with the parent’s income.

  1. If a family has a business of its own, it can include a teenager as a partner of the business. This way the teenager’s income or capital share can be avoided from being coupled with the parent’s income. In fact, as per section l0(2A) of the income tax act, the income earned as a partner is completely exempt from taxes.
  2. When a parent makes a financial investment up to Rs. 1,00,000 per year (including the amount in a parent’s public provident fund which is the maximum allowed amount in a PPF account) in the name of the teenager, the teenager to earn 8.6% tax-free interest every year. As per section 80C of the income tax act, the amount deposited in a PPF account is applicable for a tax deduction.
  3. Another condition is not providing interest on a loan to the teenager by the parent or some other relative. Hence, the chance of not including the interest with income earned can be avoided. This is would be coupled under the condition of income that could have been earned, but not earned and hence not taxable.

    File Your income tax now
  4. By using the funds from teenagers’ earnings, the investment can be made on new company shares or market securities, or other equity shares without any kind of affliction on the teenager’s tax liability or his/her guardian. This is important because, after a period of 12 months, no tax needs to be paid on capital gains. 
  5. If the teenager’s earnings are not required until his/her maturity, the funds can be invested in agricultural or non-agricultural land for long term gains.
  6. The teenager’s earning can also be invested in insurance and mutual fund scheme, which will allow the income to accumulate and can be withdrawn when the teenager attains the age of 18 or above and become an adult (or a major).

 

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Income tax provisions for a teenager in India

133

When income tax is filed, the income received by a teenager is included with the earnings of the parent, based on who is earning the highest. The income tax is filed, regardless of the fact, any gift has been given by the parent to the teenager.

As per section 64 (1A) of the income tax act, when calculating the total income of a person, the income accrued by his/her teenager is also included. There are various exceptions to this condition, to facilitate the non-inclusion of a minor’s income with his/her parent.

The inclusion of a teenager’s income or a minor’s income with the parent’s income is only applicable so long as the teenager remains a minor (or below the age of 18). If the teenager attains the age of 18 during a financial year, then the teenager will be treated as major or adult. Hence, the income earned by the teenager cannot be included with his/her parent. However, these rules don’t apply to teenagers suffering from any disability, as per section 80U of the income tax act.

File Your income tax now

As per section 10(32) of the Income-tax act, there is a provision for not including a teenager’s income with his/her parent. This for minors who earn less than Rs.1500, per month, per minor, up to a maximum of two children. 

Therefore, the minimum exempted income for minors or teenagers at all times is Rs. 1500/- which means, a teenager can only enjoy this much earnings without filing for income tax or including it with his/her parent’s income. However, this rule is also applicable to the amount transferred by a parent, uncle, grandparent, etc, it has to be less than Rs. 1500 a month, in order for it to be tax-free.

Also, as per the provisions of section 64(1A) of the income tax act, there other exceptions that do not allow for the income of teenagers or minors not be included with the parent’s income, or income accrued. These provisions pertain to

  • Physical task executed by the teenager.
  • Tasks executed via the teenager’s skill, talent, knowledge or experience.

Now let’s consider an example. If a teenager aged 15 who is skilled in computer programming, executes tasks based on this skill or knowledge then that income will be considered as income earned as per tasks executed via the teenager’s skill, talent, knowledge or experience. Hence, the income earned or salary earned cannot be included with the income of the parent. 

Conditions for non-inclusion of teenager’s income with his/her parent

Now, for income tax return filing, if the teenager does not earn income through physical work, or tasks executed via the teenager’s skill, talent, knowledge or experience, then the following conditions can be availed or followed by the teenager or parent, to avoid including the teenager’s earnings with the parent’s income.

  1. If a family has a business of its own, it can include a teenager as a partner of the business. This way the teenager’s income or capital share can be avoided from being coupled with the parent’s income. In fact, as per section l0(2A) of the income tax act, the income earned as a partner is completely exempt from taxes.
  2. When a parent makes a financial investment up to Rs. 1,00,000 per year (including the amount in a parent’s public provident fund which is the maximum allowed amount in a PPF account) in the name of the teenager, the teenager to earn 8.6% tax-free interest every year. As per section 80C of the income tax act, the amount deposited in a PPF account is applicable for a tax deduction.
  3. Another condition is not providing interest on a loan to the teenager by the parent or some other relative. Hence, the chance of not including the interest with income earned can be avoided. This is would be coupled under the condition of income that could have been earned, but not earned and hence not taxable.

    File Your income tax now
  4. By using the funds from teenagers’ earnings, the investment can be made on new company shares or market securities, or other equity shares without any kind of affliction on the teenager’s tax liability or his/her guardian. This is important because, after a period of 12 months, no tax needs to be paid on capital gains. 
  5. If the teenager’s earnings are not required until his/her maturity, the funds can be invested in agricultural or non-agricultural land for long term gains.
  6. The teenager’s earning can also be invested in insurance and mutual fund scheme, which will allow the income to accumulate and can be withdrawn when the teenager attains the age of 18 or above and become an adult (or a major).

 

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