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Opened a demat account for your minor child? Know how investment income is taxed and reported in ITR
Mint 1 hr ago·8 Oct 2026, 3:01 pm
Investing for a minor involves specific tax rules that parents must understand. Generally, any income generated from a child's investments is taxed in the hands of the parent with the higher income, unless specific exemptions apply. This is known as the 'clubbing' of income. However, income from the minor's own efforts, such as a salary or business profits, is taxed in the child's name.
To report this correctly, parents must include the minor's income in their own Income Tax Return (ITR). The income should be declared under the relevant head, such as 'Income from Other Sources' or 'Capital Gains,' depending on the source. It is crucial to maintain clear records to differentiate between income earned by the child and income generated from parental investments.
Before filing, check if any exemptions or deductions are available. For instance, income up to a certain limit from a minor's savings account or dividends may be exempt. Always consult a tax professional to ensure compliance with current regulations and avoid penalties.
Excerpt from Mint
Opening a demat account for your minor child can raise questions about who pays tax on the income and where it should be reported. From clubbing rules and capital gains to ITR schedules and exemptions, here’s what parents need to know before filing. If you have opened a demat account for your child below 18 and are…Read the original at Mint
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