Moment guide · FY 2026-27

I am investing for my newborn child

How is my child's income taxed and can I invest tax-efficiently for them?

Under section 64(1A), a minor child's income clubs to the higher-earning parent and is taxed at the parent's slab, with a ₹1,500 per child exemption — clubbing ends at 18. A girl child's Sukanya Samriddhi account is 80C-deductible with fully exempt maturity, and income from the child's own talent is not clubbed.

The #1 trap

Assuming the child's income is tax-free forever — under section 64(1A), a minor's income clubs to the higher-earning parent and is taxed at the parent's slab, except for the ₹1,500 per child exemption. A child model's or chess player's talent income, however, is the child's own and is not clubbed, and clubbing ends entirely at 18.

Nikhil and Priya, parents of a newborn daughter

Nikhil and Priya's daughter Aisha is born in 2025. They open a Sukanya Samriddhi Yojana account for her with ₹1,00,000 a year, which is deductible under section 80C within the ₹1.5L ceiling, and the account's interest and maturity are fully exempt — SSY is EEE. The ₹1,00,000 reduces their old-regime tax by their marginal rate. They also open a fixed deposit of ₹2,00,000 in Aisha's name, earning ₹16,000 a year in interest. Under section 64(1A), that ₹16,000 of minor income clubs to the higher-earning parent, Priya, and is taxed at her slab rate, with the first ₹1,500 exempt under section 10(32), so ₹14,500 is added to Priya's income. If Aisha later earns prize money from a chess competition, that talent income is her own and is not clubbed, because the clubbing rule excludes income from the child's own skill or activity. When Aisha turns 18, clubbing ends entirely, and she files her own return and claims her own basic exemption. Nikhil and Priya keep the SSY passbook and the FD statements together. If they had put the FD in Aisha's name believing it would be taxed at her nil slab, they would have been wrong — the minor-income clubbing rule taxes it in their hands anyway, so the SSY route is the genuinely tax-free way to build the child's corpus. A quick call with us dials in the final figure. Nikhil and Priya also confirm that the ₹1,500 exemption under section 10(32) applies per minor child, so two children give ₹3,000 of exempt clubbed income before the balance is taxed at the parent's slab. If the child's income is from a gift made by a third person rather than the parents, the clubbing is still to the parent with the higher income. The SSY account requires the girl to be under 10 at opening, and the maturity is 21 years from the opening date, so they opened it within weeks of Aisha's birth. If they also open a PPF in Aisha's name, the PPF interest is clubbed income until she turns 18, because the minor-clubbing rule applies to all income except talent income. The child's bank account for the FD should be a minor account operated by the parent, and the FD interest is reported in the parent's return. A quick call with us dials in the final figure.