Taxation: Income Earned By A Child From Special Talent Is Taxed In The Hands Of The Minor

Can I pay a life insurance premium for my daughter, a doctor employed in a hospital, and claim a deduction under Section 80 C?

The overall deduction under section 80 is restricted to Rs. 1.50 lakh annually for all the eligible items taken together. Moreover, deduction under section 80C is not available to those opting for lower tax rates under the new tax regime. Section 80C allows individuals and HUF deductions for certain expenses paid during the year if you opt for the old tax regime. Some of these payments are deductible if made for self, whereas some can be claimed even if paid for various family members. Deduction for life insurance premiums is available regarding payments made to keep a life insurance policy in force for the taxpayer, spouse and any child. The deduction in respect of life insurance policy for children can be claimed whether the child is married or unmarried or whether the child is financially dependent or not. So you can claim a deduction under section 80 C for the life insurance premium paid for your daughter though she is financially independent.

My 12-year-old son works in TV serials. He earned around Rs. 4.50 lakhs last year from acting in TV serials and modelling. He also receives interest of Rs. 15,000/- from bank fixed deposits from his past income. Who will be liable to pay tax on this income?

As per provisions of Section 64(1A) of the Income Tax Act, a minor's income must be added to the parent's income with a higher income; however, in case the child earned it because of his work, special talent or expertise, the income is not required to be so added and is taxed in the hands of the minor.

However, the interest on a fixed deposit must still be included in the parent's income. Please note that there is an exemption of up to Rs. 1500 per child for a minor's income, so the income of your son to be included in the parent's income shall be Rs. 13,500 only. Please note that the passive income of your son will continue to be clubbed with your income even if your wife's income becomes higher than your income in future. Since the active income earned due to his efforts by your son exceeds the basic exemption limit, he will have to file his ITR even if no tax is payable due to the rebate available under section 87A.

My wife, aged 45 years, is a housewife and earns a fixed deposit interest income of Rs 1,50,000 per year from banks. Is she required to file her income tax return?

The income tax laws have prescribed various criteria requiring a person to file an Income Tax Return (ITR). These are income based as well as non-income-based. As long as the income-based criteria are concerned, if an individual's income from all the sources exceeds the basic exemption limit before various deductions, he has to file an ITR even if no taxes are payable. Since the interest income of your wife does not exceed the basic exemption, she does not have to file any ITR. However, to ensure that the bank does not deduct TDS on interest, I advise you to submit form No. 15G with her PAN well in time to the bank/s.

The author is a tax and investment expert

(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsibe for any damage caused to any person/organisation directly or indirectly.)