Would it be possible for your talented minor child to earn a tax-free income through his hobbies or competitions that he has earned from his talent? If not, who will be responsible for paying the income tax if the employer does not pay it? Would you be able to give him/her a financial gift in the future if he/she had received many gifts from friends and family, or if your investment was a success? Does he/she have to file tax returns? Make sure you are aware of the details of the money belonging to your kids, as well as your tax obligations for both of you.
Previously, children were intelligent. Nowadays, children can handle money, choose their careers, or even run their own businesses because they are double smart. Minors (below the age of 18) earn. It is a parent’s/guardian’s responsibility to file taxes for their children, irrespective of the child’s age. Read further and get to know more information on it. Filing taxes is a citizen’s duty as it helps to uplift your social ranking.
What is the minimum age to file the Income Tax?
There is no minimum age criteria to file the income tax for a person. Even an infant can pay his/her income taxes based on a few exceptions. Income tax can be collected from the child’s income if it either earned money or unearned money. We call it as earned money when the children earn money by winning any contest/competition/tournament and so on. Salaried amount also comes under the earned money category. Wherein unearned money is that when the money is not directly earned by the minor i.e. for instance, if the amount is funded by a toddler’s grandparents to their grandchild for their future, etc. Income tax returns are calculated based on the minor children’s savings money or their investment. There are certain exceptions for the same.
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A teenager working at odd jobs need not file income tax returns. There are many odd jobs available which aren’t taken into account. Such odd job workers can neglect the existence of income tax.
As per section 10(32) of the Income-tax act, there is a provision for not including a teenager’s income with his/her parents if the amount earned by the minor is less than ₹1500 / month. Therefore, the teenager can enjoy his income if he receives less than ₹1500. However, this rule is also applicable to the amount transferred by a parent, uncle, grandparent, etc, it has to be less than ₹ 1500 a month, in order for it to be tax-free.
The Income of the Minor:
Basically, the income attained by a minor could be through an investment made under the name of the child by the parents in a mutual fund, a Public Provident Fund (PPF), a bank deposit, etc. Apart from that, the child can generate income through any manual work done by them and by exhibiting his own knowledge, skill, talent, experience. Ex: presently many kids working in the film industry, participating in the television competition shows, setting a Guinness record, etc.
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How can we club with the Income of a Minor?
The income of the minor can be clubbed with the parent’s income when the minor earns an amount of more than ₹1500. According to Section 64(1A) of the income tax act, 1961, any income generated by the minor will be clubbed with the income of the parents (exceptions are there). If both the parents are working then the minor income will be clubbed with one, who has a higher income. Here the clubbing will be done until the child is minor and once they attain the age of 18, their income will be assessed independently. When the investment was made under the name of the child, then the income generated from such investment is clubbed with the income of the parents. There are a few exemptions and restrictions to be followed while filing taxes in the name of the child who gets earned or unearned money.
How to File Your Taxes as a Teen
Filing taxes might seem like something only adults deal with, but if you’ve earned money this year, you might need to file a tax return too. Don’t worry, it’s not as complicated as it sounds! Let’s break down the process step-by-step.
Do I Need to File?
The first question is whether you need to file at all. Not every teen needs to file a tax return. It depends on how much you earned and what type of income it was.
- Earned Income: This is money you made from a job, like working at a fast food place or babysitting. If you had a W-2 form from your employer, you likely need to file.
- Unearned Income: This includes money from investments, like dividends or interest. Even small amounts of unearned income might require you to file.
Gather Your Information
Once you’ve determined you need to file, it’s time to gather your paperwork. You’ll need:
- Social Security Number (SSN): This is essential for filing your taxes.
- W-2 Forms: If you had a job, your employer will send you this form. It shows your earnings and taxes withheld.
- 1099 Forms: If you were self-employed or earned investment income, you’ll receive one or more of these forms.
- Receipts: If you had a side hustle or business, keep receipts for expenses you might be able to deduct.
Choose Your Filing Method
You have two main options for filing your taxes:
- Paper Forms: This is the traditional method, but it can be time-consuming and error-prone.
- Tax Software: Using tax software is generally easier and faster. Many options are available, and some are even free for low to moderate income taxpayers. The IRS offers a list of free software options on its website.
Complete Your Tax Return
Follow these steps to complete your tax return:
- Enter Personal Information: Start by providing your name, date of birth, and SSN.
- Choose Filing Status: Most teens will file as “single.”
- Report Income: Enter the information from your W-2 and any 1099 forms.
- Claim Deductions: You can either take the standard deduction or itemise deductions. Most teens will find the standard deduction simpler.
- Claim Credits: Tax credits can reduce the amount of taxes you owe, so it’s worth checking if you qualify for any.
- Review and Submit: Carefully review your return for errors before submitting it. You can usually file electronically, which is faster and more secure.
What if You Owe Taxes?
If you owe taxes, you’ll need to pay them by the tax filing deadline. Failure to pay on time can result in penalties and interest.
Remember, filing your taxes might seem daunting, but with the right information and tools, it’s a manageable process. If you’re unsure about anything, consider seeking help from a tax professional or using the IRS’s free resources.
Filing a Return with a Part-Time Job
If you’ve got a part-time job, you might be wondering if you need to file a tax return. The short answer is: maybe. It depends on a few things.
Do I Have to File?
- Income: If you only earned money from your job and made less than a certain amount (this amount changes yearly, so check the most recent tax guidelines), and your parents claim you as a dependent on their tax return, you probably don’t need to file.
- Taxes Withheld: Even if you don’t have to file, it might be a good idea to do so. If your employer took taxes out of your paycheck, filing a return can get you that money back as a refund.
Why File?
Getting a refund is a big reason to file, but there are other benefits too. Filing your taxes helps you build a credit history. It’s also a good way to learn about taxes and how they work. Plus, it can give you a sense of financial responsibility.
Remember: Tax rules can change, so it’s always a good idea to check the latest information from the tax authorities or consult a tax professional if you’re unsure.
By understanding these basics, you can make an informed decision about whether or not to file your taxes.
When a Minor Has Capital Gains
If you’re a teen who’s been investing your money, you might be wondering about taxes. When you sell an investment for more than you paid for it, that’s called a capital gain. And yes, teens can have capital gains too.
There’s a special tax rule for kids called the “kiddie tax.” This means that if you’re under 18 or a full-time student under 24 and your investment income is more than a certain amount, you might owe taxes at your parents’ higher tax rate.
Don’t worry, it’s not as complicated as it sounds. There are ways to handle this. You can use a special form (IRS Form 8615) to figure out the kiddie tax. Or, if your investment income is below a certain amount, your parents might be able to include it on their tax return.
It’s a good idea to talk to your parents or a tax professional to understand how the kiddie tax affects you and to find the best way to handle your taxes.
Remember, investing can be a great way to grow your money, but it’s important to understand the tax implications as well.
Conclusion
When investing under a child’s name, one of the parents should enclose his KYC details, PAN number, bank account details, and proof of identity. It is the responsibility of either of the parents who have custody of the child to file the child’s income tax return if the parents are divorced. Additionally, if both parents have died and the child is being raised by a guardian, then the child’s income will not be combined with the guardian’s; rather, a separate income tax return must be filed under the child’s name.
FAQs
Does a student need to file taxes in India?
Yes, if a student earns income. If you're a student with income from part-time jobs, scholarships, or other sources that exceed the basic exemption limit, you must file an income tax return. Even if your income is below the exemption limit, filing a nil return can be beneficial.
Can I file India tax without Form 16?
Yes, you can file without Form 16. If your income doesn't come from a salaried job, you won't have a Form 16. You can still file your income tax return using other income documents like Form 26AS, bank statements, and investment proofs.
Who is not required to file an income tax return in India?
Individuals whose total income is below the basic exemption limit are generally not required to file an income tax return. This limit changes yearly. However, there are exceptions based on age, income sources, and other factors.
What is the minimum age to file ITR?
There's no specific minimum age to file an ITR. If a minor earns income exceeding the basic exemption limit, they must file a tax return. However, in most cases, the income of a minor is typically clubbed with the parents' income.
Is minor income taxable in India?
Yes, minor income is taxable in India. However, the tax treatment depends on the nature of the income and the age of the minor. Generally, a minor's income is clubbed with the parents' income for tax purposes. There are exceptions and specific rules to consider.
Read more,
- Taxation of Minor Children in India
- How to File an ITR in India?
- How to Pay Taxes as Per New Income Tax Slab?
