Exemption under section 10(32) is available in case the income of a minor child is clubbed in the total income of his parent as per provisions of section 64(1A). As provisions of section 64(1A) and section 10(32) are interconnected, we need to understand the basics of section 64(1A) of the Income Tax Act.
As per section 64(1A), the income earned by the minor is required to be clubbed in the total income of the parent whose income is higher. However, income earned by the minor on account of any manual work carried out by him or income earned by carrying on the activity which involves the application of skill or talent of the minor is not included/ clubbed.
Thus, in case the income of minor is clubbed in the total income of the parent as per section 64(1A), then the parent with whom the income is clubbed would be eligible to claim exemption available under section 10(32).
Amount of exemption available under section 10(32) of the Income Tax Act–
The minimum of the following amount is available as an exemption under section 10(32)–
1. INR 1,500 per minor child; or
2. Amount of income included/ clubbed in the income of the parent.
Understanding exemption under section 10(32) with the help of illustration-
Suppose,
- A being a Teacher, is earning a salary income of INR 6,00,000, and Mrs. A is a house wife.
- Son of Mr. A, who is 11 years old (i.e., minor), earned interest income of INR 20,000, whereas, daughter of Mr. A, who is 5 years old (i.e., minor), has earned interest income of INR 9,000.
- As per provisions of section 64(1A), the interest income earned by both, the son and the daughter, would be clubbed in the total income of Mr. A.
- Likewise, the exemption available under section 10(32) would be INR 3,000 (i.e., INR 1,500 for each child). Mr. A’s net taxable income would be-
| Salary income | INR 6,00,000 | |
| ADD | Interest income of son | INR 20,000 |
| ADD | Interest income of daughter | INR 9,000 |
| LESS | Exemption as per section 10(32) | (INR 3,000) |
| Net Taxable Income | INR 6,26,000 |