How to inflate corpus of huf

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

27 December 2012 Hi,

I would like to create a HUF file for income tax purposes. We are a DINK. I would like to know how I can pump in money to start and subsequently inflate (substatially) my HUF corpus? I would like some way whereby me and my spouse could contribute to HUF without attracting clubbing provisions yet being able to create a substantial HUF corpus. I would not like to ask any of my family members or friends to contribute to my HUF and even if I do the sums would be too small to meet the objective.

Thank you.

P Gopal.

Pankaj Gupta

Pankaj Gupta (Expert)
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27 December 2012 Give a long loan to the huf@ 0% interest. giving loan is not transfer of income, hence clubbing provisions will not apply. After the loan period expires, again give a fresh gh

Querist : Anonymous

Querist : Anonymous (Querist)

30 December 2012 Dear Pankaj,

Thank you for the reply. I have a few queries on this loan:

1. Should the loan be given via stamp paper?

2. What can be stated as reason for loan to HUF of a substantial amount (say Rs 30 lacs) at no interest?

3. Since my HUF consists only of a husband and wife, can either one or both give this interest free loan to HUF?

Thank you.

P Gopal

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Pankaj Gupta

Pankaj Gupta (Expert)
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30 December 2012 You should give the loan through a stamp paper so that you have a proof in case issue arises in future.
Secondly, you can give the loan at nil interest. Reason of loan can be investment purpose or any other purpose through which huf intends to earn income.
But finally, your plan to create huf with your wife will not be a success.

Pankaj Gupta

Pankaj Gupta (Expert)
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30 December 2012 Because, huf is a creation of law. It is not formed under a contract. As soon as a child is born in the family, a huf comes into existence. Formation of huf is automatic. The members of huf are husband and his children both sons and daughters. Wife is not a member of huf. She is member of her father's huf.

Querist : Anonymous

Querist : Anonymous (Querist)

31 December 2012 Dear Pankaj,

Thank you for your reply.

A HUF comes into existence automatically as soon as one gets married. Child is not required for the same. Further wife is a member of the husband's HUF and a co-parcener in her Father's HUF.

This point has also been reasserted in the case {Refer : Gowli Buddanna v/s. CIT [(1966) 60 ITR 293 (SC)] that to constitute a joint Hindu family, it is not necessary that there has to be more than one coparcener in the family; a husband and wife can validly constitute a HUF.

Thank you.

P Gopal