What are the tax implications on minor’s demat account?

Income Tax 1961 Income from Capital Gains
23

Hi @S_Gupta,

If the shares allotted in an IPO are sold from a minor’s demat, the capital gains will be clubbed in the hands of the parents.

24

@Surbhi_Pal - I have a query in continuation, to the question on taxation aspect on LTCG, once the minor turns 18.

Suppose, on turning 18 - son/ daughter doesn’t have any other income (from salary / business) and partial redemption / selling is done of the securities (that are eligible for long term capital gains taxation) that were gifted by me as a parent (before they turned 18).

I am assuming the clause of clubbing income with parent will no longer be there after the child turns 18. Do they have to pay 0 tax on their PAN, until the basic exemption limit of 4 lacs of income from LTCG?

Or is the LTCG is not included in the basic exemption limit, assuming there are no other income the son/daughter may have - will they still have to pay 12.5% LTCG tax (even if they have 0 income from any other means)?

Thanks,
Manoj

25

Hello @bmkmanoj

Once your son/daughter turns 18, the clubbing provision ceases, and any LTCG from selling securities will be taxable in their hands. From FY 2025-26, income up to ₹4 lakh is exempt from tax. If your child has only an LTCG income of ₹4 lakh, they will not have to pay any tax. The basic exemption limit of ₹4 lakh applies, and for listed shares/equity mutual funds, an additional ₹1.25 lakh LTCG exemption under Section 112A applies. This ensures that no tax is payable on LTCG up to ₹5.25 lakh in the absence of other income.

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26

@Swapnil_Agarwal Thank you for sharing your inputs, appreciate it :+1: :slight_smile:

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27

Suppose i started to Put money on childs Mutual fund at the age of 1 years amd after he/she turns major and i redeem some amount so will it club on me or On my Childs income?

28

Hey @Sidhant_Naween,

Welcome to our community!

Okay so once your child turns 18, the clubbing provision no longer apply.
So any capital gains from redeeming those mutual funds will be taxed in your child’s name, and not clubbed with your income.

Hope this helps!

29

Income in a minor’s demat account is clubbed with guardian’s income, subject to tax as per applicable slabs and regulations.