Question 5 (b)

Short note: clubbing of a minor child's income (as set, 1961 Act, AY 2022-23)

5.5 marks

Time to write: About 11 minutes

From an older CBCS paper

Question

Question 5 (b) · 5.5 marks

Write short notes on any two of the topics given below:

Clubbing of income of minor child.

Paper note: The as-set version: set and answered under the Income-tax Act, 1961 for assessment year 2022-23 (previous year 2021-22), with the dates as printed. No marks are printed for this part; 5.5 inferred (two of four notes carry 11 marks).

Reworded from the university paper; the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.

Before you write

Read off the question and its marks

11 minfor 5½ marks

Read from the question

any twoThe paper asks for any 2, and this is one of them. Only 2 are marked: a third earns nothing.
short notesA note opens with the meaning, then two or three key points. No long introduction.

Write it in this order

Read; underline the asks; jot your points 1 min
1 The rule of section 64(1A) 1 mark 1 min
2 Which parent 1½ marks 3 min
3 Income not clubbed 1½ marks 3 min
4 Exemption under section 10(32) and example 1½ marks 2 min
Check: every ask answered, key terms underlined 1 min

1234

Easy marks

The rule of section 64(1A) (step 1, 1 mark): state the rule and its section exactly. It earns its marks before you apply it to the facts.

Short on time? Keep step 1 short. Trim steps 2–4 evenly rather than skip one: each is capped at its own marks.

Try it first. About 11 minutes for 5.5 marks. Write it out, then open the solution.

Solution

Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.

1. The rule

All income that arises or accrues to a minor child is included in the total income of a parent (section 64(1A)). The rule prevents a parent from reducing his tax by putting investments or income-earning assets in the names of his minor children. It covers income from any source: interest, rent, dividends, capital gains, and so on.

2. In whose income it is clubbed

Where the parents' marriage subsists, in the income of the parent whose total income (before this clubbing) is greater.
Where the marriage does not subsist, in the income of the parent who maintains the child in the previous year.
Once included in one parent's income, the child's income of later years is not added to the other parent's income unless the Assessing Officer, after giving that other parent an opportunity of being heard, is satisfied that this is necessary (Explanation to section 64(1A)).

3. Income not clubbed

Income from manual work done by the child (proviso (a) to section 64(1A)).
Income from an activity using the child's own skill, talent, or specialised knowledge and experience, such as acting, singing, sport or a quiz prize (proviso (b)).
Any income of a minor child who suffers from a disability of the kind described in section 80U.
Income of a child who has become a major: only income of the period while the child is a minor is clubbed.

Such income is assessed in the child's own hands.

4. Exemption of ₹1,500

Where a minor child's income is clubbed, the parent may exempt up to ₹1,500 of it for each child (section 10(32)). Only the excess is added to the parent's income. The exemption is not open to a parent who opts for the new regime of section 115BAC for assessment year 2022-23: his or her total income is computed without any exemption under section 10(32) (section 115BAC(2)(i), inserted by the Finance Act, 2020, section 53), so the whole of the child's income is added.

5. Example

Example (our own): Rohan, aged 14, earns ₹3,000 of interest on a fixed deposit his grandfather gifted him and ₹60,000 as a child actor in a television series. His father's income is ₹9,00,000 and his mother's ₹12,00,000. The interest is clubbed with the mother's income (the greater), less ₹1,500: ₹1,500 is added (if she opts for section 115BAC, the whole ₹3,000 is added). The acting income is Rohan's own and is not clubbed.

Where the 5.5 marks sit

#	Component	Marks
1	The rule of section 64(1A)	1
2	Which parent	1.5
3	Income not clubbed	1.5
4	Exemption under section 10(32) and example	1.5
	Total	5.5

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