I want to start investing (will buy only index fund slowly) in my two children's name. Children are 1 & 6 year old. Reason is to reduce taxes. If any units are sold in future when they turn major, it will show in their income. If they are in my name it will get clubbed with my income and get taxed higher. I know we need to open minor bank account and money can be transferred only from that account to buy the units.
Anyone investing in their children's name? What is your setup like? Which banks are the easiest to open minor account and provide netbanking without any transfer limits.
Thanks for your help!
LTGC is 10%... so be it on your name or your son...you will end up paying 10% tax.
Unless you are looking for tax harvesting or trying to have gain within exemption limit(who knows what rule will change after 12 years)
Sudarshan61 wrote:
LTGC is 10%... so be it on your name or your son...you will end up paying 10% tax.
I believe his goals are aligned for when his kids become 18+ major, so that the LTGC then will be applicable on his kids, not his name by then... Till they are minor, if redeemed, all taxes will be borne by him, but once they are adults, they will be accountable for that.
@dcb_lover Since your goals are at least 10-15 years, go for stable nationalized banks and same goes for index fund amc.
BlueFlash wrote:I believe his goals are aligned for when his kids become 18+ major, so that the LTGC then will be applicable on his kids, not his name by then... Till they are minor, if redeemed, all taxes will be borne by him, but once they are adults, they will be accountable for that.
@dcb_lover Since your goals are at least 10-15 years, go for stable nationalized banks and same goes for index fund amc.
Thanks. This is what I was thinking. Once they become major and since they will not have any other income, any capital gains realised if under their income tax exemption limit (say 2.5L), then they will not have to pay any tax.
dcb_lover wrote:Thanks. This is what I was thinking. Once they become major and since they will not have any other income, any capital gains realised if under their income tax exemption limit (say 2.5L), then they will not have to pay any tax.
You are betting too much wrt equity tax gains. Already, in 5 years many changes have taken place like grandfather cost index and dividend tax and LTCG taxation. There was some discussion doing rounds that on achieving adulthood, the re-kyc would on paper and for practical purpose, mean selling off all MF units and buying new ones which effectively defeats your whole purpose since you'd be the one liable to pay taxes on all capital gains.
PPF, for one, won't come into tax bracket any time soon. Cover full ppf allocation in their name before proceeding to MFs.. You cannot put more than 150K in each kid's name per year and ofc, you have to pay tax on it too.
Their entry into MF name would be linked to your PAN number till they re-do KYC on majority. This may get in your way if any MF is limiting SIP/Lumpsum amount (like Mirae Asset currently & SBI before).
Income tax exemption limit may be over 5L after 18 years.
Ramta_Jogi wrote:Thanks for your reply.You are betting too much wrt equity tax gains. Already, in 5 years many changes have taken place like grandfather cost index and dividend tax and LTCG taxation. There was some discussion doing rounds that on achieving adulthood, the re-kyc would on paper and for practical purpose, mean selling off all MF units and buying new ones which effectively defeats your whole purpose since you'd be the one liable to pay taxes on all capital gains.
PPF, for one, won't come into tax bracket any time soon. Cover full ppf allocation in their name before proceeding to MFs.. You cannot put more than 150K in each kid's name per year and ofc, you have to pay tax on it too.
Their entry into MF name would be linked to your PAN number till they re-do KYC on majority. This may get in your way if any MF is limiting SIP/Lumpsum amount (like Mirae Asset currently & SBI before).
Income tax exemption limit may be over 5L after 18 years.
PPF (if you go strictly by rule) allows a person to put maximum 1.5L against his and dependant's account together. Some people assume this limitation is for availing income tax benefit only but technically it's not so.
Maximum limit of one lakh fifty thousand rupees as specified in sub-paragraph (1) by an individual
shall be inclusive of the deposits made in his own account and in the account opened on behalf of the minor.
https://www.indiapost.gov.in/VAS/DOP_PDFFiles/S...
I do have PPF account and planning to open for children as well but God knows if during maturity they cite this rule.
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