In view of the above, the Commission examined the various provisions of the Income Tax Act, 1961 including legislative history of Section 64(1A), Report of the Dr Raja J Chelliah Committee and case laws on the subject and submitted its Report No. 265 titled Prospects of Exempting Income arising out of Maintenance Money of ‘Minor’, to the Government on 20.03.2017.
In para 11 of the Report, the Law Commission has recommended 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 and would defeat the very object of inserting the provisions of Section 64(1A) of the Income Tax Act, 1961.
(Release ID :159568)
Source: Press Information Bureau (PIB)
Source: Bombay High Court