Teen Earns Crores: How Income Tax Rules Apply To Minors In India

Summary of this article

Minor income from talent is taxed separately, not clubbed
Clubbing rules apply to investment income in a child’s name
Young cricketers, influencers, actors may file tax on earnings
Parents must manage tax compliance for minor income carefully

A 15-year-old earning crores may sound unusual, but it is no longer impossible. Young cricketers, actors, influencers, gamers, singers, and content creators are increasingly earning serious money before they turn 18. The recent attention around teenage cricketer Vaibhav Sooryavanshi, who reportedly has a net worth of around Rs 7 crore, has once again raised an important tax question: when a minor earns money, who pays the income tax?

The answer depends on where the income comes from. Under Indian income-tax rules, a minor’s income is not always treated in the same way. In many cases, the income is clubbed with the income of the parent. But where the child earns money through his or her own skill, talent, knowledge, or effort, the tax treatment can be different.

When A Minor’s Income Is Added To Parents’ Income

As a general rule, income earned in the name of a minor child is clubbed with the income of the parent whose total income is higher. This means that if parents invest money in a fixed deposit, mutual fund, insurance product, or any other asset in the child’s name, the income generated from that investment is usually not taxed separately in the child’s hands, according to a recent report by NDTV.

For example, if a parent opens a fixed deposit in the name of a minor and it earns interest, that interest income is generally added to the income of the parent. Similarly, if mutual fund units are bought in the child’s name and they generate taxable gains, the clubbing rules may apply.

This is where many families make mistakes. They assume that putting an investment in the name of a child will automatically reduce the tax burden. That is not how the rule works. If the money belongs to the parents and the income is passive in nature, the tax department will usually look at it as the parents’ income for tax purposes.

There is a small relief available in such cases. When a minor child’s income is clubbed with the parent’s income, the parent may be able to claim an exemption of up to Rs 1,500 per child, subject to the applicable conditions. However, this relief is limited and does not make clubbing irrelevant.

Why Talent-Based Income Is Treated Differently

The position changes when the minor earns money through personal effort, skill, knowledge, talent, or specialised ability. This is the reason cases involving young sportspersons, actors, singers, creators, or influencers need to be viewed differently from ordinary investment income.

If a child earns prize money, match fees, endorsement income, acting fees, YouTube income, or creator income because of his or her own talent, such income may be taxed in the child’s own hands. It is not automatically added to the income of the parents merely because the person earning it is below 18.

In the case of a young cricketer, income from cricket contracts, tournament earnings, and brand endorsements is linked to sporting talent and performance. Since the money arises from the child’s own ability and not from parental investment, it may be treated as the minor’s independent income for tax purposes.

The same principle can apply beyond sports. A teenage actor earning from films or advertisements, a child singer earning performance fees, a young gamer winning tournament money, or a school student earning from a popular online channel may all fall into this category, depending on the facts of the case.

Parents Still Need To Handle Compliance Carefully

Even when income is taxed in the minor’s own hands, the responsibility of managing compliance cannot be ignored. Since a minor may not be able to handle legal and tax filings independently, parents or guardians usually have to ensure that the correct records are maintained, income is properly reported, and taxes are paid on time.

This becomes especially important where the income is large or comes from multiple sources. Endorsement money, tournament fees, brand collaborations, digital income, and appearance fees may all have different documentation. Tax deducted at source, bank credits, contracts, and invoices should be properly tracked.

Families should also be careful about what happens after the income is received. If the child’s earnings are later invested, the tax treatment of the income from those investments should be examined separately. The original earnings may have come from the child’s talent, but future interest, dividends, or capital gains may need proper reporting based on the applicable rules.

According to experts, most people assume that if a minor earns money, it automatically gets taxed in the parents' hands. “That's not entirely true. Section 64(1A) does club a minor's income with the parent who earns more, but it carves out a meaningful exception — income that a child earns through their own skill, talent, specialised knowledge, or physical effort is treated differently,” Dinesh K. Jain, managing partner - Dinesh Aarjav & Associates, chartered accountants, told Outlook Money.

So a teenage cricketer getting paid for matches, a child actor receiving fees, a young singer earning from performances, or even a teenage gamer or content creator monetising their channel — none of this gets clubbed with the parents' income. The child earned it through their own ability, so it's taxed in their own hands. A parent or legal guardian then files the return on their behalf as a representative assessee.

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“As for which return to file, that depends on the nature of the work. If it's being reported as business or professional income, ITR-3 applies in most cases. Where the child qualifies under the presumptive taxation scheme, ITR-4 would be the appropriate form,” adds Aarjav.

“The exception doesn't extend everywhere, though. Passive income — interest, investment returns, income from assets that parents have gifted to the child — still gets clubbed. The only breathing room there is a small deduction of Rs 1500 per child under Section 10(32), which barely makes a dent in practice. There's one more category worth noting. If a minor has a specified disability covered under Section 80U, the clubbing provisions don't apply to them at all. Their income is assessed independently, regardless of where it comes from,” Aarjav told Outlook Money.

What Happens After The Child Turns 18

Once the child becomes an adult, the clubbing rules relating to minor income no longer apply in the same way. After turning 18, the individual is treated as an independent taxpayer. Income earned after that point is taxed directly in that person’s own hands, whether it comes from salary, business, profession, investments, or any other source.

For parents, the key lesson is simple. Merely opening an account or investment in a child’s name does not automatically shift the tax burden. But where the child genuinely earns money through talent, skill, or personal effort, the income-tax law recognises that distinction.

As more minors enter sports, entertainment, social media, and digital businesses, this issue is likely to become more common. Families should therefore not treat minor income casually. The source of the income, the person who generated it, and the way it is reported will decide how it is taxed.

FAQs

1. Is a minor’s income always clubbed with parents’ income?

No. Passive income from investments in the minor’s name is usually clubbed with the parent earning more, but income from the child’s own talent or skill may be taxed separately.

2. Can a child’s sports, acting, or YouTube income be taxed in the child’s own hands?