Vaibhav Sooryavanshi has an estimated net worth of ₹7 crore at 15: How does income tax work for minors?

Teen cricket sensation Vaibhav Sooryavanshi has reportedly built an estimated net worth of around ₹7 crore at just 15 years of age. Much of his wealth comes from his success on the cricket field, including IPL earnings, league contracts and brand endorsement deals. Since he is still a minor, it raises a crucial question: how does income tax work when someone has earnings at a young age?

The tax treatment of minors differs from that of adults under Indian income tax laws. In most cases, a minor's income is not taxed separately and is instead clubbed with the income of the parent who has the higher taxable income. However, there are some important exceptions.

How does income tax work for minors?

Any person under the age of 18 is considered a minor, As per section 64(1A) of the income tax act, any income that accrues or is paid to a minor is generally clubbed with the income of the parent who has has higher taxable income. The income is then taxed in the hands of that parent as though it were their own income, according to the income tax portal.

Minors generally earn an income in the following ways:

• Savings in a bank account or fixed deposits.
• Investments made in their name by the parents.

If a minor's income is less than ₹1,500 in a financial year, the entire amount is exempt from income tax. In such cases, the parent can claim an exemption of ₹1,500 for each minor child whose income is clubbed under section 10(32) of the income tax act.

However, if the minor's income exceeds ₹1,500, only that amount can be claimed as an exemption, and the remaining balance remains taxable in the parent's hands.

Here's how tax rules on income earned by minors work in different scenarios:

• If both the mother and father are earning, the income of the minor is added to the income of that parent whose annual income is higher.
• If the parents are divorced, the minor's income is added to the parent's income who has the custody of the child.
• If both the parents are not alive, the income of the minor is not clubbed with the guardian, but instead a separate income tax return is filed.

An important exception to the clubbing provisions applies to minors with disability specified under Section 80U of the income tax act. In such cases, the child's income is not be clubbed with the income of the parent.

A person is considered differently-abled when they have more than 40% disability, including blindness, poor vision, hearing impairment, loco motor disability, and mental illness.

When does a minor need to file a separate ITR?

Income earned by a minor through their own skills, talent, specialised knowledge, or manual work, such as content creation, acting, cricket, chess, singing, or brand endorsements, is taxable in the minor’s own hands and is not clubbed with the income of their parents as per the income-tax act.

“This exception applies because the income arises from the minor’s personal efforts and abilities rather than from assets or funds transferred by a parent,” said Pranav Sai S, tax expert at ClearTax.

ITR filing for minors — Which form to choose and how to report income

According to Sai S, the income earned by a minor is taxed according to the normal tax slab rates applicable to an individual taxpayer. Depending on the nature of the activity, it is commonly reported under “Profits and Gains from Business or Profession (PGBP),” particularly in cases involving professional services, sponsorships, endorsements, content creation, or tournament earnings.

Where the minor carries on a profession or business, ITR-3 is generally applicable, while ITR-4 may be used if the conditions for presumptive taxation are satisfied. The return is filed in the minor’s name through a parent or legal guardian acting as the representative assessee, the expert noted.

Since Vaibhav Sooryavanshi's earnings arise from his personal skills and talent as a cricketer, his income is not subject to the clubbing provisions and is taxable in his own hands. The same principle applies to other minors who earn income through their own abilities, such as child actors, reality show participants, singers, social media creators, or contestants on television shows like MasterChef.