Gift to huf & sec 64(2) of income tax act 1961

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Sunny Vaswani (Querist)
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05 August 2014 My Query is , members of HUF are relative of HUF & they can gift the funds to HUF unlimited means there is no limit of Rs 50,000 which is for NON RELATIVE.

so if member of huf has gifted money to huf , and HUF is earning intrest income on those funds , will that interest income be clubbed in hands of Member of HUF by virtue of Sec 64(2) of Income Tax Act 1961 or it will be taxable in hands of HUF.
Because Sec 64(2) contains word property & its explanation includes money.

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Sunny Vaswani - 9146428627
sunnyvaswani96@gmail.com

CS Advocate Abhishek Goyal

CS Advocate Abhishek Goyal (Expert)
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06 August 2014 Explanation mentions :' any money or investment for the time being representing the sale proceeds thereof'. So going by the words used in the statute, in my opinion any money gifted to the HUF will be clubbed in the hands of the donor only if it represents sale proceeds of any movable or immovable property.

Sunny Vaswani

Sunny Vaswani (Querist)
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07 August 2014 Means if an member of huf has capital of rs 10 lacs & from that capital he gifts HUF Rs 3 lacs & huf makes TDR (i.e FD) of that 3 Lacs so wheather that interest on rs 3 lacs is taxable to huf or will be clubbed in the income of member of huf by virtue of Sec 64(2) ?????

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Asha Kanta Sharma

Asha Kanta Sharma

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25 July 2024 Under the provisions of the Income Tax Act, 1961, regarding gifts to a Hindu Undivided Family (HUF) and the application of Section 64(2), here’s how the scenario you described would typically be treated:

### Gift to HUF by a Member

1. **Nature of Gift**: When a member of an HUF gifts funds to the HUF, these funds become part of the HUF's property. This includes money gifted directly to the HUF, which can then be invested in various assets such as fixed deposits (FDs).

2. **Interest Income**: Any interest income earned on the FD or other investments made by the HUF using the gifted funds is considered income of the HUF itself.

3. **Tax Treatment**:
- **HUF’s Taxation**: Interest income earned by the HUF from investments made from the gifted funds will be taxable in the hands of the HUF. HUFs are taxed separately from their members.
- **Sec 64(2) Clubbing Provisions**: Section 64(2) of the Income Tax Act deals with clubbing of income in certain cases where income is transferred without adequate consideration to the spouse or minor child. However, gifts from a member of the HUF to the HUF itself are not covered under Sec 64(2) for clubbing provisions. Sec 64(2) specifically applies to transfer of income-producing assets or funds among family members such as spouse or minor children.

4. **Applicability of Sec 64(2)**: Since the gift is from a member of the HUF to the HUF itself, and not to another individual family member like a spouse or minor child, the interest income on the FD will not be clubbed in the hands of the member under Sec 64(2).

### Conclusion

- **Taxability**: Interest income earned by the HUF from funds gifted by a member will be taxable in the hands of the HUF.
- **Sec 64(2) Clubbing**: Sec 64(2) does not apply to gifts made by a member of the HUF to the HUF itself. Therefore, the interest income from the gifted funds will not be clubbed with the income of the member who made the gift.

In summary, the interest income earned by the HUF on funds gifted by a member will be taxed in the hands of the HUF itself, and there is no clubbing of income under Sec 64(2) in such cases. However, it’s advisable to consult with a tax advisor or chartered accountant for specific advice tailored to your situation and to ensure compliance with all tax laws and regulations.