Section 64(1A): How a Minor's Income Gets Clubbed With a Parent's ITR

If you've opened a demat in your child's name, set up an FD for them, or parked some shares in their account — you've also taken on an Indian tax-code provision called Section 64(1A). It clubs the minor child's investment income with the higher-earning parent's ITR. Most parents discover this only at filing time, when the math doesn't look how they expected.

This article walks through exactly how Sec 64(1A) works in FY 2025-26: what gets clubbed, what doesn't, which parent the income lands with, the regime-specific ₹1,500/child exemption (it's smaller and more conditional than you think), how it shows up on the ITR, and a worked example with both old and new tax regimes side-by-side.

Reading time: ~11 minutes. If you're filing this year, jump straight to the Sharma family worked example for the numbers.

What Section 64(1A) actually says

Section 64(1A) of the Income Tax Act is the rule that prevents Indian families from sheltering investment income inside a minor child's name to avoid the higher-bracket tax that would otherwise apply.

The rule, in plain English: any income arising to a minor child (under 18 years of age) is added to the total income of the parent whose income — excluding the minor's clubbed income — is higher.

It exists because, historically, well-advised families would buy stocks, FDs, or property in a minor's name, treat the minor as a separate taxpayer, and slot the gains into the minor's near-zero tax bracket. Sec 64(1A) closes that loophole: from the tax department's view, your minor child is your taxable income for these purposes, no matter what the demat statement says.

If your minor child has any of the following, you're in scope:

• A demat account with realised gains, dividends, or bonus issues
• A bank savings account or fixed deposit earning interest
• A mutual fund folio with dividend or capital-gain distributions
• Any income from rented property held in their name
• Any other income produced by investment, not by their own effort

If your child is 18 or older during any part of the financial year, Sec 64(1A) does not apply for that year onward — see the related situations section on the age-18 transition.

What gets clubbed (and what doesn't)

Clubbed under Sec 64(1A):

• Capital gains on the minor's demat (both STCG and LTCG)
• Interest from bank deposits, FDs, RDs held in the minor's name
• Dividends on stocks or mutual funds in the minor's name
• Rental income from property registered in the minor's name
• Any other investment-derived income — the rule is broad

NOT clubbed (statutory exceptions):

• Scholarships received for the minor's education
• Income from the minor's own skill or labour — for example, a child actor's acting fee, a child model's modelling fee, a child athlete's prize money
• Prize money won via skill-based competitions where the minor's participation was personal
• Manual-work income the minor earned through their own effort

The principle is consistent: passive income (from capital you placed in the minor's name) gets clubbed; active income (from the minor's own effort or talent) does not.

The ₹1,500 per child exemption — and the new-regime catch

Section 10(32) gives a ₹1,500 per minor child exemption against clubbed income, but this is available ONLY if the parent files under the OLD tax regime. Under the default new regime (Sec 115BAC, opt-out default since FY 2023-24), Sec 10(32) is one of the Section 10 / Chapter VI-A exemptions removed. For new-regime filers, the entire clubbed amount enters the parent's Schedule CG / 112A without any per-child reduction.

In practice, with the new regime now the default, most parents reading this article will get no per-child exemption. The exemption matters only if you specifically opt out of the new regime and file under the old regime — usually because of large 80C / 80D / home-loan / HRA claims that the old regime allows.

The exemption is a flat ₹1,500 per child per year (or the actual clubbed amount, whichever is lower). It's not indexed to inflation — it's been ₹1,500 since 1992 — and was already small before the new regime made it conditional.

Which parent gets the clubbing

The rule sounds simple but has several edge cases:

Standard case (both parents alive, earning): The minor's income clubs to the parent whose total income — excluding the minor's clubbed amount — is higher. The "excluding" matters: you compute the parent's tax-base first, then compare, then assign the clubbed amount to whichever parent's base is higher.

Tied income: If both parents have identical income (rare but possible — e.g., both on identical salary scales), the clubbed amount stays with whichever parent reported the minor's income in any earlier year. If this is the very first year, either parent may claim the clubbed amount; the choice must then remain consistent in future years.

One parent deceased: Clubbing goes to the surviving parent regardless of income comparison.

Both parents deceased / minor under legal guardianship: Per the Sec 64(1A) Explanation clause, the income clubs to whoever is the legal guardian.

Divorced or separated parents: Clubbed to the parent who has actual custody of the minor and maintains them, regardless of which parent has the higher income.

Single parent (never married): Clubbed to that parent — there's no "other parent" to compare against.

The subtlety most people miss: the higher-income test uses each parent's income before clubbing. If you computed it post-clubbing the comparison would be circular (the minor's income would affect which parent it clubs to).

Worked example: The Sharma family

Meet the Sharmas:

• Rajesh Sharma (father): salary ₹35,00,000 in FY 2025-26 → 30% slab under either regime
• Priya Sharma (mother): salary ₹18,00,000 in FY 2025-26 → 30% slab under old regime, similar effective rate under new
• Arjun Sharma (minor, age 13): has a Zerodha demat opened by Rajesh as the guardian-operator
• Arjun's FY 2025-26 realised gains: ₹40,000 STCG (shares held less than 12 months) + ₹85,000 LTCG (shares held more than 12 months)

Rajesh's pre-clubbing income (₹35L) is higher than Priya's (₹18L) → Rajesh is the clubbing parent. Arjun's gains land on Rajesh's ITR via Schedule SPI, then flow into Rajesh's Schedule CG (for STCG) and Schedule 112A (for LTCG).

Clubbed amount lands on Rajesh's ITR

The ₹1,500 reduces the clubbed amount in the old regime. The taxpayer typically allocates the ₹1,500 to the STCG bucket (saves tax at 20%) rather than the LTCG bucket (which is already exempt under the ₹1.25L Sec 112A exemption — allocating ₹1,500 there would save zero tax).

Tax on Arjun's clubbed gain — both regimes

This shows only the tax on the clubbed portion. Rajesh's tax on his ₹35L salary is a separate computation and is added to this.

The old regime saves ₹300 here — the ₹1,500 exemption × the 20% STCG rate. Small for one minor, but for families with multiple minors (₹1,500 per child stacks), or for parents whose minor's STCG is much larger, it adds up.

A 4% Health & Education cess applies on Rajesh's consolidated tax (his salary tax + this clubbed-gain tax), not separately on the clubbed portion.

The bigger point: the regime choice affects clubbed-income treatment, not just the parent's own income. Old vs new isn't only about 80C deductions and standard slab rates — it also changes the math when a minor's investments are clubbed.

How clubbed income flows through the ITR

The mechanics on the parent's ITR:

1. Schedule SPI ("Income of Specified Persons") — declare the clubbed minor's income here, broken down by income type (capital gains, interest, dividend, etc.).
2. The amounts in Schedule SPI flow into the corresponding computation schedules of the parent's ITR:
   • Minor's STCG → parent's Schedule CG, Sec 111A row
   • Minor's LTCG on listed equity → parent's Schedule 112A
   • Minor's bank interest → parent's Schedule OS (Income from Other Sources)
   • Minor's dividends → parent's Schedule OS
3. The minor does NOT file their own ITR for clubbed income. If the minor has only investment income (which is fully clubbed), no separate ITR is required. The exception: if the minor has skill-based earnings, scholarships, or other non-clubbed income above the basic exemption — they file their own ITR for just the non-clubbed portion.
4. Sec 10(32) (the ₹1,500 exemption, old regime only) is claimed by the parent on Schedule SPI as a deduction against the clubbed total before it flows into the computation schedules.
5. Cess and surcharge apply on the parent's consolidated tax bill — there's no separate computation for the clubbed portion.

If Arjun in our example were 14 and earned ₹50,000 as a junior tennis tournament prize on his own skill — that ₹50,000 is NOT clubbed, and a separate ITR may need to be filed by Arjun (via Rajesh as guardian) just for that amount.

Related situations

This article focuses on the core 64(1A) rule. Several adjacent situations come up often and will each get their own article in the family pillar:

• The age-18 transition. The financial year in which the child turns 18, Sec 64(1A) stops applying — the (now-adult) child files their own ITR under their own PAN. The demat usually needs to be operationally converted from "minor operated by guardian" to a standalone adult account through the broker. Coming soon on the family pillar.

• Opening a minor demat. Requires KYC for both the minor and the operating parent / guardian; PAN for the minor; bank account in the minor's name (operated by the parent). The minor's demat is operationally the parent's responsibility but legally owned by the minor. Coming soon.

• Gifting to a spouse — Section 64(1). A separate clubbing rule for assets transferred to one's spouse without adequate consideration. It's in the same family of anti-avoidance rules as 64(1A) but works differently. Coming soon.

• HUF (Hindu Undivided Family) as an alternative. An HUF is a separate tax entity from its members; it can hold investments and earn income outside the Sec 64 clubbing framework. The trade-off is formation, ITR-2 / ITR-3 complexity, and ongoing accounting. Coming soon.

Frequently asked questions

Q: Does clubbing stop when my child turns 18? A: Yes. From the financial year in which the child turns 18, Section 64(1A) no longer applies. The (now-adult) child files their own ITR under their own PAN for that year onward.

Q: Does the ₹1,500 per child exemption still apply? A: Only under the old tax regime. Under the new regime (opt-out default since FY 2023-24), Section 10(32) is one of the exemptions removed under Sec 115BAC. Most filers default to the new regime unless they specifically opt for old.

Q: Is the ITR filed under the minor's PAN or the parent's PAN? A: The clubbed income is reported in the parent's ITR via Schedule SPI (Specified Person's Income). The minor does not file a separate ITR for clubbed income. If the minor has only clubbed income — no skill-based earnings or scholarships needing separate treatment — no minor ITR is needed.

Q: What if both parents earn exactly the same income? A: The clubbing stays with whichever parent the minor's income was first reported with in an earlier year. If this is the first year, either parent may claim the clubbed income, but the choice must remain consistent across future years.

Q: Does the source of the minor's funds matter? For example, if a grandparent gifted the money? A: No. Once the funds are in the minor's name — regardless of who gifted them (parent, grandparent, uncle) — all subsequent investment income is clubbed under Section 64(1A) to the higher-earning parent. The source of the original capital does not change the clubbing rule.

Further reading

• Consolidating tax P&L across multiple brokers — the hub article for families with multiple demats
• Zerodha tax P&L guide
• AngelOne tax P&L guide
• Kotak Securities tax P&L guide
• Groww capital gains report
• F&O turnover & ITR-3 walkthrough
• LTCG ₹1.25L exemption FY 2025-26 — coming soon

This article reflects rules as of FY 2025-26 (Budget 2024 amendments). Tax laws change yearly — always confirm with your CA or the income-tax portal before filing.