When do minors have to pay taxes?
Yes, minor have to pay taxes. When any income that is paid to a minor is attached to the parent's income under section 64(1A) then it would be considered the part of the parents’ taxable income.
Minor - Any person who is below the age of 18 is considered as a minor. He or she can earn an income from bank account savings, fixed deposits (FDs) or any other investments in their name by their parents. If the minor's income is less than Rs. 1, 500/-, the minor's income doesn’t get added to the parent's income and the parent(s) can have a claim to exemption of Rs.1, 500/- for each minor child whose income is clubbed together. If both the parents are earning, the income of the minor gets added to the income of that parent who is earning more. In case of divorced parents, the minor's income is clubbed with the parent having custody of the child. If both the parents are not alive, the income of the minor is not clubbed with the guardian, but instead a separate income tax return is filed.
Some exceptions:
When a child earns an income from an activity for which he uses special talent/ skills or knowledge, it is required for the minor to file an income tax return. If a child is suffering from any disability such as blindness, poor vision, hearing impairment, loco motor disability and mental illness (above 40%), his income as specified under Section 80U will not be added to the income of any parent.
Can a minor possess a PAN card?
Yes, a PAN a minor can have a PAN card.
Income Taxes for Teenagers
It can be a bit of a shock to a teenager who discovers what amount of money is taken out from his actual income for income taxes. And, it can be confusing for teens and their parents to know how to file an income tax return for a minor, when the tax season rolls around.
Five important facts
Age does not determine whether or not a person has to pay income tax. If the teenager receives his income from a company, income tax will be deducted to some extent. The minimum earning teens have to pay taxes annually and it changes each year so it's pertinent to stay aware of the latest tax laws.
After you are hired for a job, employees are provided with forms to complete, such as W-4 form. Make sure you know your social security number if you are a minor and you can find a sample W-4 form online and you can review it.
If the minor has inherited money, stocks, or real estate, then make sure to check with an accountant. Teens have to report income if accounts are in their name and the minors who inherit from grandparents or an uncle, for instance, may have impromptu capital gains they need to pay tax on.
If the minor babysits, mows lawns, or operates a small dog walking business, he will be considered self-employed and have to claim his/her income. So, it's pertinent for you and your teen to keep track of your money earned from those odd jobs. The threshold changes every year, so stay on top of the minimum amounts your teen earns before they have to file their taxes which usually is only a few hundred dollars.
Federal income tax helps to pay for services like law enforcement and repairing of the national highways and state tax may help to pay for schools, jails and assist people with disabilities.
It's never too early to start teaching your teen about money, taxes and economic issues. It is betterment for their understanding of how money is earned and how taxes are paid; and it’ll make them better equipped to handle their own budget.
