How to save TAX by Creating Minor Child Trust?

POSTED BY wishy ON April 10, 2012 1:23 pm COMMENTS (6)

How to save TAX by Creating Minor Child Trust?

I want to open a non profit Child Trust for my 4 years old daughter. If I invest 1 Lakh rs per year till she becomes 18Years old, will these 1Lakh Rs will be reduced from my “Taxable Income?”

Please advice, How one can save Tax by creating such Trust in general?


6 replies on this article “How to save TAX by Creating Minor Child Trust?”

  1. Dear Vaibhav. No. Only Hindu, Sikh, Jains are allowed to run HUF.



  2. Vaibhav Kini says:

    Dear Ashal,

    Can a NOn-Hindu Parsi go in for a HUF?

    1. Dear Vaibhav, an interesting addition to my prev. reply. If a hindu male marries a non hindu female, this family can enjoy HUF status.



  3. wishy says:

    Hi Ashal.!

    Yes, from my own salary account, I will transfer 1 Lakh rs each year to this Child Trust.

    It means:

    * This Amount is part of my income which is clearly visible in my Tax details.

    Many times on CNBC tax shows, Mr Lakhotia (Famous Tax specialist) advice people to make family trust. I also went through some details of Trust based Tax saving, but my Primary query is still that how exactly does the Trust helps in “long run”?

    * Is a child trust allowed to invest (I know that Tax has to be paid in this case).?

    Any input or source of info will be highly appreciated!


    1. Dear Wishy, You can’t save Tax on your own salary income by transferring X amount to that Child Trust. Yes after paying Tax, if you are gifting to that trust & the trust is investing that amount elsewhere & generating an income out of those gifted amounts, this income ‘ll become taxable in the name of trust not yours’.

      In my opinion, if you are a hindu, HUF is a better alternative for you.



  4. Dear Wishy, do you mean, by transferring 1L Rs. every year from your own income & diverting that amount to the trust, you want to save tax on your income?

    Please confirm me if my understanding is correct.



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