Taxation on gift received by minor and return filing of minor account

Income Tax Income from Other Sources
, ,
1

In case, my minor child receives shares of worth 5 lacs as gift from my close friend and in the same year I received 50000 rs in cash as gift,
1)what will be my tax liability?
2)Gift to my child will be clubbed to me?
3) How is this gift reported to tax department?
4) how to file income tax return of minor?

1 Like
2

Hi @hirendabhi,

Let me resolve the questions one by one:

  1. What will be your tax liability?
  • Since cash gifts up to â‚ą50,000 in a financial year are exempt, your cash gift won’t be taxable.
  • However, the shares received by your minor child will be taxable since they are from a non-relative and exceed â‚ą50,000 in value.
  1. Clubbing the gift income of the minor child:
  • Since your child is a minor, the gift’s value and any income earned from those shares (like dividends or capital gains) will be clubbed with your income.
  • If both parents earn, it is clubbed with the parent whose income is higher.
  1. How is this gift reported to the tax department?
  • The gift should be disclosed under 'Exempt Income in your ITR (even if not taxable).
  • If the shares generate income (like dividends), that income will be shown as per the clubbing provisions under Schedule SPI in your ITR.
  1. How to file an Income Tax Return (ITR) for a minor?
  • Generally, a separate ITR for a minor is not needed since their income gets clubbed with the parent’s income.
  • However, if the minor has earned income due to their own skills or talent (like acting, singing, etc.), they may need to file a separate ITR.
1 Like
3

Gifts received by a minor from relatives are exempt from tax, but income generated from such gifts is taxable in the hands of the minor’s parents. If a minor’s total income exceeds the basic exemption limit, tax must be filed under the parent’s name. The parent or guardian files the return on behalf of the minor.

4

I have a question on income generated from gift.
In case of shares, the income generated on shares could be capital gains or dividends.
But what if someone pledges those shares and uses the margin from that to generate trading income (Fno segment) on that, will that trading income clubbed with parents in this case ?

5

Hello @Yogesh_Sonawane

Yes, the F&O trading income generated using margin from pledged gifted shares will be clubbed with the parent’s income until the child turns 18. After that, it will be taxed in the child’s hands.