Law panel opposes tax relief on interest on money deposited for maintenance of minor child
New Delhi: Interest earned on the money deposited by a parent for the maintenance of a minor should not be tax-exempt, the Law Commission of India recommended on Monday.
The law panel’s report comes in the wake of a reference from the Punjab and Haryana high court. The high court is hearing a petition seeking a court direction that interest on the amount deposited for maintenance by a parent under an order of the court should be exempt from tax.
The provision of law under consideration is Section 64(1A) of the Income Tax Act, which includes in the total income of an individual any income that accrues to his/her minor, i.e. a person below the age of 18 years.
In its 265th report submitted to the government on Monday, the law panel headed by chairperson and former apex court judge B.S. Chauhan said that allowing such an exemption would “open floodgates for tax evasion and defeat the very object of inserting the provisions...brought to plug in the loophole to prevent avoidance of tax”.
A copy of the 11-page report was uploaded on the official website of the Law Commission.