Taxation On Revenue Receipts By Children

Monetary gifts or income for a minor child shall be included in the total income of the parent, and the sum would be taxable. The amount received towards maintenance of a child in case of a divorce is considered a revenue receipt and is deemed as taxable income.

Q 1) I am an Income Tax payer and have been filing my applicable Income Tax Return regularly. I have a six year-old son who has received money as gift on different occasions which adds up to Rs 150000. I have deposited the said amount of Rs 150000 as a fixed deposit with a bank in my son’s name. Can I submit Form 15G to the bank for non-deduction of Income Tax at source from the interest received on the deposit?

- Umesh Pittie

Under Section 64(1A) of the Income Tax Act, 1961, all income accruing or arising to a minor child shall be included in the total income of the parent, except the following:

(i) Income accruing or arising to a minor child on account of any manual work done by him/her; or
(ii) Income accruing or arising to a minor child on account of any activity involving application of his/her skill, talent or specialised knowledge and experience; or
(iii) Income accruing or arising to a minor child suffering from any disability of the nature specified in Section 80U of the said Act.

Thus, if your minor child’s income does not fall under one of the three exceptions, the same will be included in the total income of the parent as follows:

a) Where the marriage of the parents subsists, with the income of that parent whose total income (excluding the minor’s income) is greater; or
b) Where the marriage of the parents does not subsist, with the income of that parent who maintains the minor child in the previous year.

As the clubbing of income is applicable, the parent cannot submit Form 15G for non-deduction of tax at source as the income of the parent with that of the minor may be taxable. However, if the income of the parent (including the income of the minor so clubbed) is within the limit of basic exemption, the parent may submit Form 15G for non-deduction of tax at source.

Q 2) I have filed an application for divorce in a family court. As per the order of the said court, I am receiving Rs 2000 per month as interim maintenance for my child who is staying with me and also money for rent (Rs 2500 per month) from my husband. Is the amount I receive taxable as my income?

- Roma Sardesai

Truly speaking, the amount paid by your husband towards maintenance of your child and rent should not be taxable as the same is paid by him out of his capital and he has not claimed deduction under the Income Tax Act, 1961 in respect of the same. However, the payment being in the nature of revenue receipt, the Income Tax department may view it as taxable. Representations are being made to the department to make such sums received non-taxable, but no decision has been taken in this regard so far.

Q 3) I am 61 years old and have been paying Professional Tax regularly so far. As far as I understand, Professional Tax is not payable by senior citizens. What is the age limit with respect to filing Professional Tax in Maharashtra?

- Sadashiv Narvekar

As per the provisions of clause (f) under Section 27A of the Maharashtra State Tax on Professions, Trade, Callings and Employments Act, 1975, persons who have completed the age of 65 years have been exempt from payment of Professional Tax. It may be noted that though under the Income Tax Act, 1961 and other laws the age for the purpose of determining senior citizenship has been fixed at 60 years, the Profession Tax law has remain unchanged. Hence, you will not be exempt from paying Profession Tax until you turn 65.