Is Interest On Fixed Deposits Of Minor Taxable In India?

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    Children many a times receive gift from relatives and grandparents in the form of money. Parents then tend to keep the money so received in fixed deposits so as to ensure they come handy when needed for the child.

    Also read How TDS or tax is deducted from fixed deposits

    Is Interest On Fixed Deposits Of Minor Taxable In India?
    But, what happens to the interest income so received by the child or minor from the fixed deposit? As we all know interest on bank deposit is very much taxable. This means that the interest income would need to be added to the total income and tax declared accordingly.
     

    Interest on fixed deposit income received by a minor is also taxable. However, such income cannot be taxed to children and minor and hence the parents have to pay tax on them.

    What this means is that the interest income received by the children will be clubbed along with the parents income and the parents would then pay income tax on the same.

    Now, if the fixed deposit so matures after the child attains the age of 18, then it would be clubbed with the child's income since he can now file his tax returns.

    Also read at what age one needs to file income tax returns in India

    So, whether you open a Fixed Deposit in your name or on the name of the minor child would make very little difference as ultimately one of the parents would end-up paying the tax.

    Of course, if one of the spouse does not have any source of income like interest, rental, salary or business income it would be better to club the fixed deposit interest income of the minor with that parent.

    Also read smart ways to save TDS on fixed deposits

    GoodReturns.in

    Story first published: Monday, July 27, 2015, 10:21 [IST]
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