Tax treatment of interest on Minor FD…

Forums Tax Planning Tax treatment of interest on Minor FD…

Tax treatment of interest on Minor FD…

My “in laws” have gifted a fixed deposit to my minor daughter. The FD is made in the name of “Suhani Gupta u/g Parmod Gupta ( Suhani is my daughter – age 12 years and Parmod is my mother in law ) . The interest is cumulative receivable on maturity in the year 2023.
Now the query is – Annual Interest due from this FD should be shown annually in the income tax return of parents – throughout the tenure of FD ( based on the concept of Accrual basis ) OR it can be shown in the income tax return of Suhani Gupta in the year 2023 when the entire interest is received and she will be above 18 years ( based on the concept of Cash basis ) ……!!!!!!

Profile photo of Tarun Gupta Asked By: Tarun Gupta 1 replies 1 helpful answers Last Updated: 6 months, 1 week ago
  • Profile photo of Tarun GuptaTarun Gupta
    Participant

    My “in laws” have gifted a fixed deposit to my minor daughter. The FD is made in the name of “Suhani Gupta u/g Parmod Gupta ( Suhani is my daughter – age 12 years and Parmod is my mother in law ) . The interest is cumulative receivable on maturity in the year 2023.
    Now the query is – Annual Interest due from this FD should be shown annually in the income tax return of parents – throughout the tenure of FD ( based on the concept of Accrual basis ) OR it can be shown in the income tax return of Suhani Gupta in the year 2023 when the entire interest is received and she will be above 18 years ( based on the concept of Cash basis ) ……!!!!!!

  • Profile photo of Chetan ChandakChetan Chandak
    Moderator

    Interesting question. Typically interest income earned  by a minor child is to be taxed in the hands of either of the the parent drawing higher income. Further as per section 145 of the IT Act interest income can be reported on due or receipt basis as per the choice of the taxpayer. But this choice has to be made once and to be followed uniformly for all the years for all the income falling in the same category. So if you have any other FD interest on which is being reported on accrual basis then following  receipt basis just for the FD in the minors hand will be bit difficult and challenging.

You must be signed in to reply to this question.