Archive · 8 Oct 2026
How Parents Report and Pay Tax on Minor Children’s Investments
A child under 18 can have investments in a demat account, but a parent operates the account.
Usually, the investment income is added to one parent’s income when they file taxes.
If the parents are married, it is generally added to the parent who earns more before the child’s income is counted.
If the parents are separated, it is added to the income of the parent who looks after the child.
The parent uses a tax return form that has a section for a child’s income.
Dividends and investment gains are taxed according to the rules for those kinds of income.
Money given by a parent to invest for the child is treated as a non-taxable gift, according to the article.
Parents should keep records of transfers and check tax statements for both the child and themselves.
A minor may hold a demat account operated by a guardian, and investment income is generally included in a parent’s tax return.
For married parents, the income is generally clubbed with the parent whose income is higher before the clubbing; after a marriage ends, it goes to the parent maintaining the child.
The parent reports the income using ITR-2, or ITR-3 if they have business income; ITR-1 does not provide Schedule SPI.
The income keeps its original tax character: dividends are taxed at the parent’s slab rate, while the article states equity STCG is taxed at 20% and eligible LTCG at 12.5% above the ₹1.25 lakh threshold.
Parents should reconcile tax records for both PANs and report income in the relevant schedules; gifts from parents are not taxable, and a clear transfer trail should be maintained.
- Who
- Parents or guardians of minors holding investments, and the minor account holders.
- What
- Guidance on how a minor’s investment income is taxed and reported in a parent’s income tax return.
- When
- For the relevant financial year; income earned after a child turns 18 during that year is treated as the child’s own income.
- Where
- India.
- Why
- To explain which parent reports a minor’s investment income, how it is taxed, and which tax-return schedules to use.
Income attribution and reporting
Income attribution and reporting
Who includes the income
Income attribution and reporting
For parents in a continuing marriage, the minor’s income is generally clubbed with the parent whose income is higher before the clubbing.
Income attribution and reporting
If the marriage is no longer subsisting, the income is clubbed with the parent who maintains the minor during the year; a later change requires the Assessing Officer’s agreement, according to the article.
Income after the child turns 18
Income attribution and reporting
Income earned while the child is a minor is generally included in a parent’s return.
Income attribution and reporting
Income earned after the child attains majority during the financial year is treated as the child’s own income.
- Account rules
- A minor may hold a demat account, operated by a guardian until the child turns 18.
- Return used
- The parent generally uses ITR-2, or ITR-3 if they have business income; ITR-1 lacks Schedule SPI.
- Which parent reports income
- For a continuing marriage, the parent with higher income before clubbing generally reports it. If the marriage has ended, it is clubbed with the parent maintaining the child.
- Equity STCG rate stated
- 20%.
- Equity LTCG rate stated
- 12.5% on gains above ₹1.25 lakh; the threshold applies to the parent’s aggregate eligible LTCG, including clubbed income.
- Section 10(32) exemption
- Up to ₹1,500 per minor child, or the actual clubbed income if lower; the article says it is available only under the old tax regime.
- Gift and records
- A parent’s gift for investment is not taxable, and parents should maintain a clear bank trail.
- Reporting schedules
- The article identifies Schedules SPI, CG, 112A, OS, EI, TDS2, SI, and Part B-TI for relevant reporting.