I am investing Rs 3.5 lakh in my daughter’s name in a bank recurring deposit for her future education needs. She will receive the lump sum maturity amount when she is 20. What will be the tax treatment for the amount at that time?
The income arising or accruing to a minor child is clubbed in the hands of the parent with the higher income
I am investing Rs 3.5 lakh in my daughter’s name in a bank recurring deposit for her future education needs. She will receive the lump sum maturity amount when she is 20. What will be the tax treatment for the amount at that time?
Chandrakant More, Aurangabad
You can explore investing the sum in mutual funds as well, however, the income arising or accruing to a minor child is clubbed in the hands of the parent with the higher income (if your spouse is working, the one with the higher income between you two). Assuming that you follow cash receipt method for taxation of interest income, the total interest received by your daughter will be taxable in her hands. If saving tax on such a savings was your intent—it does not work that way.