‘Same money...’: CA explains reveals how minor MF accounts unlock major tax benefits for parents
The financial expert explained that while any income generated before the child turns 18 is clubbed with the income of the higher-earning parent, the real advantage begins after the child becomes an adult.
- Nov 20, 2025,
- Updated Nov 20, 2025 1:51 PM IST
Creating long-term wealth for your child while optimising taxes is one of the smartest financial decisions a parent can make — and with the right investment structure, both goals can be achieved simultaneously. Financial educator CA Nitin Kaushik has now explained how a simple shift in the way parents invest for their children can unlock significant, fully legal tax benefits.
In a detailed post on X (formerly Twitter), Kaushik highlighted how most parents regularly invest for their child’s future — for education, security, and long-term goals — but miss out on an overlooked tax advantage.
According to him, the strategy is simple: instead of investing in mutual funds or equities in the parent’s own name, open a minor mutual fund account in the child’s name, with the parent acting as guardian.
Kaushik explained that while any income generated before the child turns 18 is clubbed with the income of the higher-earning parent, the real advantage begins after the child becomes an adult.
“Once your child turns 18, the investments made in their name now legally belong to them,” he wrote. “And any capital gains made after that point are taxed in their hands — not yours.”
With most 18-year-olds having little to no taxable income, they can use their entire basic exemption limit — ₹3 lakh (old regime) or ₹3.5 lakh (new regime, FY25-26) — plus the ₹1.25 lakh long-term capital gains exemption. This creates a potential ₹4.25–₹4.75 lakh tax-free window every financial year.
Kaushik illustrated this with a scenario: a parent investing ₹5,000 per month for 10 years in their child’s name could build a corpus of ₹10-₹12 lakh by age 18. Redeeming ₹4 lakh in long-term gains for college expenses could attract zero tax in the child’s hands — versus a possible 10% LTCG tax if the investment were in the parent’s name.
“Same money. Same investment. Just smarter structure,” Kaushik noted, adding that financial literacy is not only about chasing high returns but also about keeping more of what you earn through better planning.
He also emphasised simple compliance steps: treat the investment as a gift to the child, maintain a basic gift record, ensure guardian KYC for the minor folio, and remember that the folio automatically transfers to the child upon turning 18.
“Smart investing isn’t just about your portfolio’s value,” Kaushik concluded. “It’s about how much of it stays with your family after taxes. And sometimes, the best financial planner you can have… is your child.”
Creating long-term wealth for your child while optimising taxes is one of the smartest financial decisions a parent can make — and with the right investment structure, both goals can be achieved simultaneously. Financial educator CA Nitin Kaushik has now explained how a simple shift in the way parents invest for their children can unlock significant, fully legal tax benefits.
In a detailed post on X (formerly Twitter), Kaushik highlighted how most parents regularly invest for their child’s future — for education, security, and long-term goals — but miss out on an overlooked tax advantage.
According to him, the strategy is simple: instead of investing in mutual funds or equities in the parent’s own name, open a minor mutual fund account in the child’s name, with the parent acting as guardian.
Kaushik explained that while any income generated before the child turns 18 is clubbed with the income of the higher-earning parent, the real advantage begins after the child becomes an adult.
“Once your child turns 18, the investments made in their name now legally belong to them,” he wrote. “And any capital gains made after that point are taxed in their hands — not yours.”
With most 18-year-olds having little to no taxable income, they can use their entire basic exemption limit — ₹3 lakh (old regime) or ₹3.5 lakh (new regime, FY25-26) — plus the ₹1.25 lakh long-term capital gains exemption. This creates a potential ₹4.25–₹4.75 lakh tax-free window every financial year.
Kaushik illustrated this with a scenario: a parent investing ₹5,000 per month for 10 years in their child’s name could build a corpus of ₹10-₹12 lakh by age 18. Redeeming ₹4 lakh in long-term gains for college expenses could attract zero tax in the child’s hands — versus a possible 10% LTCG tax if the investment were in the parent’s name.
“Same money. Same investment. Just smarter structure,” Kaushik noted, adding that financial literacy is not only about chasing high returns but also about keeping more of what you earn through better planning.
He also emphasised simple compliance steps: treat the investment as a gift to the child, maintain a basic gift record, ensure guardian KYC for the minor folio, and remember that the folio automatically transfers to the child upon turning 18.
“Smart investing isn’t just about your portfolio’s value,” Kaushik concluded. “It’s about how much of it stays with your family after taxes. And sometimes, the best financial planner you can have… is your child.”