In a recommendation submitted to the Punjab and Haryana High Court and the Law Ministry, the law panel has recommended against granting such an exemption in its report 'Prospects of exempting income arising out of maintenance money of minor'.
"The Commission is of the view that income earned by way of interest on the amount of maintenance deposited in favour of the child does not require to be exempted from being clubbed with the income of the parent/guardian; as such exemption, if granted, would open flood gates of tax evasion...," it said.
The issue was referred to it by the Punjab and Haryana High Court.
At present, as per the Income Tax laws, the interest on money deposited as maintenance amount for a minor is clubbed with the income of the guardian.
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Referring the matter to the Law Commission, the Punjab and Haryana High Court had asked it to consider "as to whether the Income Tax Act, 1961 requires amendment to create exception against clubbing of a minor's income accruing from maintenance money with either of the parent's income".
"The matter is, therefore, forwarded to the Law Commission and the Ministry of Women and Child Development for consideration whether suitable amendments are required to be made in the Income Tax Act, 1961, to ensure that maintenance settled on minors is exempted from income tax or is treated differently," the court had said in last January.