Assessee, Minor Children Eligible for Separate Tax Exemption: IT

The Kolkata Income Tax tribunal has clarified that long-term capital gains earned by the minors when clubbed/jointly taken with that of their parents are eligible for deduction separately under Section 54EC of the Income-Tax act. However, this clause exempts long-term capital gains earned up to Rs.50 lakh if reinvested in prescribed securities.

The Kolkata ITAT said that only net taxable long-term capital gains need to be clubbed with the parent’s income and not the gross long term capital gains. For example: If a parent and his minor child earns Rs.51 lakh each in long-term capital gains then only Rs.1 lakh of the minor child’s gain but not the total Rs.51 lakh, need to be clubbed with the parent’s Rs.1 lakh gain for the tax assessment.

This rule will act as a major relief to the parents whose long-term capital gains along with gains of their minor child can be taxable by a way of clubbing. This rule/clause also applies equally to clubbing long term capital gains between spouses.

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