Hi, I have a question regarding investment in my adult Child’s name. My child just turned 18 and I plan some of my investments in her name to take advantage of the lower income tax slab. While I am clear of the fact that she does not have to pay any tax on any money she receives from me, I wanted to know if I can freely move money between her and mine account as and when required. Is money given to a child and money taken from the Child free from any tax in the hand of the receiver?
Any other things I should be aware of while doing this?
Hello @Vijay_Sharma
Gift received from a relative is exempt from tax under Section 56(2) of the Income Tax Act. The definition of relative includes lineal descendant and lineal ascendant too. Thus, any money transferred to your child’s account or vice-versa is exempt from tax.
You can read more about it here - Tax on Gift: Rules and Exemptions As per Income Tax Act in India
However, we must also consider the provision of clubbing of income. Clubbing of income means income of other person included in assessee’s total income. It is generally applicable when income is earned by minor child without application of skills, talent or specialised knowledge. However, if the child is above 18 years, then clubbing will be applicable if you transfer any income without transfer of the asset.
In your case, you’re planning to tranfer funds to her account and use the same for investments. Thus, it will not attract provisions of clubbing of income.
My minor child is helping me in intraday trading in my share market business .
I m paying him salary .
Can i claim it as expense from my earning ?
Hi @HIREiN
You can claim an expense as a business expense if it directly connected to the nature of your business. However, the Assessing Officer (AO) has a right to question the same by issue of a tax notice. Further, if you minor child has an income, it attracts provision for clubbing of income too.