Report No. 265

5. Report of Dr. Raja J. Chelliah Committee

The interim report on Tax Reforms for December, 1991, submitted by Dr. Raja J. Chelliah Committee7 reads as under:

7. At para 6.38 of the Report.

At present, in India the income of the minor admitted to the benefits of any partnership is included in the income of the parent, irrespective of whether or not either parent is a partner in the same firm. Further, any income accruing to a minor from any asset transferred to him by the parents or the grandparents is included in the income of the parent or grandparent who has transferred such income-generating asset. However, in respect of all other income accruing to him, the minor is a separate taxable entity. Keeping in view the rationale for aggregation of the minor's income with that of the parents, the Committee recommends that -

(a) All incomes of a minor, other than wage income, should be aggregated with the "total income of-

(i) the parent having the higher income, where the total income of one parent or of both the parents happens to fall below the exemption limit for individuals;

(ii) anyone of the parents at the option of the parents where the income of both the parents exceeds the exemption limit; and

(iii) if over time the income of the parent, with whom the income of the minor was aggregated earlier, goes below the exemption limit, the parent having the higher income.

(b) It follows that the income of the minor arising from assets transferred to him or her by anyone including his grandparents should be aggregated with the income of the parent as recommended above.