Question

What is the tax on mutual fund gains earned by a minor investor?

Accepted Answer

Minor's income (including mutual fund gains) is clubbed with the higher-earning parent's income and taxed at the parent's applicable slab rate — with an exemption of ₹1,500 per year per child — Under Section 64(1A), income (including capital gains from mutual funds) earned by a minor child is clubbed with the income of the parent whose taxable income is higher and taxed at the parent's rate. A deduction of ₹1,500 per year per minor child is allowed from the clubbed income. This clubbing continues until the child attains majority (18 years), after which the child's income is taxed independently.