Tax implications if a minor turns 18 years in feb. 2014

Your Query: Can the income of the FY 2013-2014  be split into two categories:

(1)  the income that arises during the period upto 2/2/2014 when he was a minor and this income has to be clubbed with the income of the parent;

(2)  the income that arises from 3/2/2014 to 31/3/2014 which will be his income as a resident individual (not to be clubbed with the income of the parent).

In the case of a person turning 60 even in February 2014, he will be considered a senior citizen for the full financial year 2013-2014. So, if a child becomes a “major” in February 2014, will he not be a “major” for the full financial year 2013-2014? In this case, there will be significant tax saving as clubbing provisions will not be applicable and the total income will be split into two – that of the parent and that of the son. Give a reference to the applicable section of the Income Tax Act. 

Reply: Section 64(!A) of the Income tax Act stipulates that the total income of an individual shall include all income of his minor child. Therefore, the income will have to be split as suggested in your query.

Comparison with 'senior citizen' is uncalled for in view of the specific legal provisions.

The income in such cases will not be split as period prior to and after attainment of majority. Once he attains majority during the previous year (irrespective of the date on which he attains majority) he can file a separate return.You may refer to Sec-64 of the Act.

 Dear Mr.Rajagopalan Sir,  I need your advice. Since my relative turns 18 years on February 3, 2014, it will be almost impossible to segregate the income that he will earn in 2 months - from February 3 to March 31, 2014! Isn't it prudent/ practical that for AY 2014-15 (Financial Year 2013-14), his income for the entire financial year is clubbed with his parent's income and hence he does not file IT Return for AY 2014-15. In AY 2015-16 (Financial Year 2014-15), he will be a "major" for the entire 12 months from 1st April 2014 to 31st March 2015 and he can file IT Return then....it will be simpler as then there will be zero clubbing. What's your opinion? Thanks.

YOUR QUERY:Since my relative turns 18 years on February 3, 2014, it will be almost impossible to segregate the income that he will earn in 2 months - from February 3 to March 31, 2014! Isn't it prudent/ practical that for AY 2014-15 (Financial Year 2013-14), his income for the entire financial year is clubbed with his parent's income and hence he does not file IT Return for AY 2014-15. In AY 2015-16 (Financial Year 2014-15), he will be a "major" for the entire 12 months from 1st April 2014 to 31st March 2015 and he can file IT Return then....it will be simpler as then there will be zero clubbing. What's your opinion?

REPLY: Law neither permits nor envisages such an approach merely because it is 'simpler, prudent or more practical'. If it is not possible to accurately compute the income he would earn as a minor  from 1-4-2013 to 02--2-2014, you my estimate it as a days-wise fraction of his income for the year ending on 31-03-2014, ie;

if the amount of his income for the Financial Year 2013-14 is Rs 'A' ,

his income for the minority period in the Financial Year 2013-14, would be: A* (365-57)/365,

and

the income for the period during which he would be a Major,  from 03-02-2014 to 31-03-2014 (=57 days), would be : A* 57/365.

Many thanks, dear Rajagopalan Sir. You have explained it very nicely!