tax on kids savings account

[rajasekhar varada]

Does money deposited in kids account in bank invite tax?

[raji agg]

hi rajasekhar,

if u have deposited money in kids' account out of ur income has been
decalred under income tax then there is no tax. eg if u are a salaried
employee and ur employer has deducted tax on ur salary and out of that
salary u have deposited some money in ur kid's accaount then it does
not invite any tax. It does not matter whether the deposit in kid's
account comes out of ur income / savings of earlier years.

If u can not explain the source of deposit of income (in kid's
account) to the income tax department then it will be treated as
income from undisclosed sources and added in the income of the parent
whose income is higher. Further u wold have to pay income tax and
heavy penalties and lose peace of mind.

If both husband and wife are earning but the income of both of them is
below taxable limits they need not file income tax return. In that
case if they can explain that the total income of family is surplus
after all household expenses and the surplus money is deposited in
kid's account then no problem and no tax.

Income tax department can go back to six years to check ur accounts so
even old deposits can also be subject matter of scrutiny from income
tax department.

bye

raji agg

[raghavendra gn]

hi

taxable in the hands of guardian

[Sanjay Dudhoria]

Interest earned on amount deposited in kids accounts will be taxable in the hands of guardian. Rs. 1500 is exempt per child max of 2.

 

Regards

Sanjay Dudhoria

Vadodara

[SANJAY]

What if the gifts recd by children are deposited in their account,
like cash recd on birthday, raksha bandhan and other family
occassions. Pl clarify.

[raji agg]

hi rajasekhar,

gifts are part of income and liable to be included in the income of

parent whose income is higher.

if the gift has been recieved from a relative (as per definition of
income tax) then the entire amount of gift is exempt and no tax is
leviable thereon. There are certain other circumstances where gifts
are exempt.

I was told that earlier when the gifts were tax free One political
party leader obtained gifts worth hundreds of crores from party
workers and purchased very expensive properties running in several
hundred crores.

last para is just in lighter vein.

bye

raji agg