09 August 2013
Mr. A is minor. in Dec-12 he became major. He has some FDs in his name. in previous years interest on these FDs were clubbed in his mother income. (on yearly accrued basis). He has a business also.
Now my Question is 1 whether interest on FD will be his income for whole year in A.Y. 2013-14. OR it will be in part before Dec it will be clubbed in his mother and after Dec it will be his income 2 whether business income is fully on his account. in my view it will be full in his account because he is major now.
09 August 2013
Dear Mr. Siddhartha Bhardwaj as per my view business income will be wholly in minors (now major) account. as on 31st March 2013 he is major and he will file his own return. Business income will be counted as his own income so that will not be clubbed. I am doubtful on interest on FD as it was not his business. It was by investment only so minor didn't use his efficiency for that
09 August 2013
If the business is run, owned & managed by the minor himself then the income will ALWAYS be taxable in his hands.
It will NEVER be clubbed in the hands of the parents.
However, it is very difficult to prove in case of business that the minor is using his own efforts/knowledge/skill.
Note: If the income from business was clubbed in the hands of the parents in the earlier years then this year also it will be clubbed on proportionate basis (upto dec 12)
09 August 2013
Dear Siddhartha it is true that previously business income was clubbed in mother's income. But normally it is assumed that business income is generated on last day when P/L is made and that day minor was major so business income will be clubbed in his hands.
1. How can business income be generated ONLY on the last day when the business was in fact carried on for the whole year??
2. Further it is always assumed that income is accrued evenly during the year.
3. Also when you prepare P&L A/c you mention Profit & Loss Account for the period 1st April to 31st March. P&L is prepared for the whole year and not as on the last day. Balance Sheet is prepared as on the last day.
09 August 2013
I know these things as business is on going concern. But I am talking about income tax purpose. you will agree everything will depend on situation. in this situation, this point will be valid. Anyway, thanks for your answers. I think I can work on that case by taking all the discussion in view.
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