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My daughter performs in music shows and earns around three lakhs from it every year. Is she liable to pay any income tax on it or will her income be included in my income?  In addition to the above income she has interest income of Rs. 45,000/- from bank fixed deposits made out of her income. 

As per the clubbing provisions of the Income Tax Act any income arising or accruing to a minor is required to be clubbed and included in the income of the parent whose income is higher. However, in case the income is earned by the child through manual work or by using his special talent and expertise the clubbing provisions will not apply for such income. 

Therefore, income earned by your daughter for performing in music shows shall be taxed in her hands. Since the income earned by your daughter exceeds the basic exemption limit of 2.50 lakhs you will have to file her ITR as father and natural guardian. 

However, in case the taxable income does not exceed five lakhs she will not have any tax liability due to rebate available under Section 87A. Please note the interest earned on fixed deposit by her shall be clubbed with the income of the parent whose income is higher. 

Please note that once the income of such child is included in income of a particular parent it shall continue to be so included in the income of such parent even if the income of such parent becomes lower than the income of the other parent. 

So the interest income of Rs. 45,000/- shall be included in the income of the parent whose income is higher. Please note that there is an exemption upto Rs. 1500/- per child so the income of your daughter to be included in parent’s income shall be Rs. 43,500.

Balwant Jain is a tax and investment expert and can be reached on jainbalwant@gmail.com and @jainbalwant on Twitter

 

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