Income Tax implication of reward given by a member to personal HUF
I’m Karta of my HUF. In FY 2020 – 2021 I’ve invested my private tax paid quantity in my HUF account, which is producing curiosity revenue. What are the tax implications for me in addition to for my HUF?- Anand Shah
The funding of particular person member’s cash within the title of HUF is mostly handled as reward made except the member meant it to be a mortgage. Since this transaction solely happened final yr, you might have the choices to deal with it both manner in case revenue tax return for you and your HUF are pending.
If you want to deal with this transaction as reward from you to your HUF, it has tax implications. As per the provisions of Section 56(2)(x), any reward acquired by an individual is totally taxable within the palms of the recipient in case combination of all of the presents acquired in the course of the yr exceeds fifty thousand rupees. As lengthy as the combination of the all of the presents doesn’t exceed this threshold throughout one monetary yr, there isn’t a tax implication on the reward quantity.
However, presents acquired on sure event in addition to from sure specified family should not handled revenue within the palms of the recipient regardless of the quantity concerned. In case of HUF all its members are lined inside the definition of specified relative. so the quantity gifted by you to your HUF just isn’t handled as revenue within the palms of the HUF.
When the federal government provides by one hand, it usually takes again by one other hand. As per provisions of Section 64(2) the place any member presents any asset to the HUF of which he’s a member, the revenue arising from such gifted asset is required to be clubbed with the revenue of the member who has gifted such asset. So although the revenue from the funding will get credited within the books of accounts of the HUF, you’ll have to embrace such revenue in your palms yr after yr and even after the gifted asset modifications it kind.
Please notice that the clubbing provisions will apply solely in respect of the asset gifted and won’t lengthen to the revenue generated from funding made out of the revenue generated from such asset. Even after belongings of the HUF have been both partially or utterly partitioned, the revenue in respect of share allotted to your spouse will proceed to be clubbed in your hand.
In order to keep away from such perpetual complication, I’d advise you to deal with this transaction as mortgage to your HUF. Charge curiosity on this quantity and take it again as and when you’re snug. In order to keep away from any litigation, I’d advise you to cost curiosity at market charge.
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