According to the income tax filing system, teenagers' earnings are included with those of their parents, according to the payer's highest earnings. Any gift given by the parent to the teenager will not affect the income tax filing. Lets us learn more about Income Tax Provisions For A Teenager In India
Technological advancements have significantly enhanced children’s learning abilities, and the rise of social media has created numerous opportunities for them. Today, many children are engaged in unique jobs and earning substantial incomes. However, with earnings come tax obligations. There is no age limit for filing income tax returns; teenagers under 18 who earn income—whether through work or other means—must fulfill their tax responsibilities under certain conditions.
What are earned income and unearned income with respect to teenagers?
teenagers can receive two types of income:
- Earned Income: This includes money earned through the teenager’s own efforts, such as winnings from contests, salaries from jobs, or income from a business or venture they manage.
- Unearned Income: This consists of money received without direct effort, such as gifts from family, interest from savings accounts, or returns on investments made in the teenager’s name by parents. It also includes income from assets transferred to the teenager by their parents or fixed deposits held in their name.
Is it mandatory for a teenager child to file an income tax return?
Filing an income tax return is mandatory for teenagers if their income exceeds the basic exemption limit. The teenager’s income can be handled in two ways:
- Direct Filing: If the teenager’s income is below ₹1,500 per year, it does not need to be included in the parents’ income. However, if the income exceeds ₹1,500, it is combined with the parents’ income, and they must pay the tax. Parents can claim a tax exemption of ₹1,500 per child per year for up to two children.
- Clubbed Income: According to Section 64(1A), any income exceeding ₹1,500 is clubbed with the parents’ income. If both parents are working, the teenager’s income is added to the income of the parent with the higher earnings. If the parents are divorced, the income is included with the income of the parent with custody. If the parents are deceased, a guardian must file the tax return separately, without including it in their own income.
In specific cases, such as when a teenager earns income through exceptional skills, or is disabled as per Section 80U, the income can be reported separately under the teenager’s name.
Taxation of teenager’s Income from Skill-Based Contests
Did your child just win big on a quiz show? Congratulations! But did you know their winnings might come with a tax bill? If your child has earned money by showing off their smarts on a TV show or contest, it’s considered taxable income. That means they’ll need to pay a flat 30% tax, plus an extra 4% for a health and education fee. Don’t worry, the show organisers usually take care of this upfront, but it’s still good to know.
Need help navigating these tax rules? Our tax experts can guide you through the process, making sure your child’s hard-earned money is protected. Don’t wait until the last minute – secure your child’s financial future today.
Make tax season stress-free with our tax calculator 2024. Use our income tax calculator for precise calculations.
How to Invest and Save Tax for teenagers in India
Want to secure your child’s financial future while also getting some tax benefits? You’re in the right place!
- Simple Savings: Starting early is key. You can open bank fixed deposits or post office accounts directly in your child’s name. These are safe options to grow their money over time.
- Investing for the Long Haul: If you’re looking for potentially higher returns, consider investing in mutual funds or stocks. While you can’t do this online for your child, you can open a Demat account in their name. This lets you buy and hold shares on their behalf.
- Tax Perks: There’s a bonus! Any income your child earns from these investments is usually added to your income. But don’t worry, you can claim a tax deduction of up to ₹1,500 for each child. This little tax break can help offset some of the costs.
- Important Note: This tax benefit is only available in the old tax regime. If you’re on the new tax regime, you won’t get this deduction.
Remember, starting early and planning wisely can make a big difference in your child’s financial future.
What documents are required for a teenager to file their own return?
If your child has earned income, they might need to file a tax return. Here’s what they’ll need to get started:
- Proof of Identity: Their PAN card is essential for tax-related matters.
- Income Records: Keep track of all money earned, whether it’s from a job, contest winnings, or other sources. This includes checks, cash, and bank deposits.
- Savings Details: Information about any interest earned from savings accounts, fixed deposits, or investments is important.
- Contact Information: A working mobile number and email address are necessary for online interactions.
- Online Access: Your child will need to set up an account on the income tax e-filing portal.
- Bank Account Details: Accurate bank account information is crucial for any tax refunds or payments.
Which tax slab/rate will apply to child taxpayers for FY 2023-24?
Children filing tax returns for the Financial Year 2023-24 are subject to the same tax slabs and rates as adults. Here’s a table for your reference:
| Income Slab (₹) | Old Tax Regime (%) | New Tax Regime (%) |
| Up to 2,50,000 | Nil | Nil |
| 2,50,001 – 5,00,000 | 5 (Rebate ₹12,500) | 5 (Rebate ₹12,500) |
| 5,00,001 – 7,50,000 | 20 | 10 |
| 7,50,001 – 10,00,000 | 20 | 15 |
| 10,00,001 – 12,50,000 | 30 | 20 |
| 12,50,001 – 15,00,000 | 30 | 25 |
| 15,00,001 and above | 30 | 30 |
The Union Budget 2023-24 simplified the income tax structure by reducing the number of tax slabs from six to five under the new tax regime.
| Income Range | Tax Rate |
| Rs 0 – Rs 3,00,000 | Nil |
| Rs 3,00,001 – Rs 6,00,000 | 5% |
| Rs 6,00,001 – Rs 9,00,000 | 10% |
| Rs 9,00,001 – Rs 12,00,000 | 15% |
| Rs 12,00,001 – Rs 15,00,000 | 20% |
| Above Rs 15,00,000 | 30% |
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