10 April 2023
I am considering paying installments for an under construction property from personal savings in which HUF will be co-owner as HUF is new and doesn't have sufficient income to pay those installments. I don't need HUF to payback that amount.
1. Is it fine to register HUF as co-owner in the property? Other co-owner will be wife.
2. Will there be any income clubbing on rental income for me in future? I understand that such income will be equally taxable for my wife and HUF as per their slabs being co-owner.
3. Should the Agreement of Sale have my wife and HUF mentioned now itself or I can include HUF later also at registration time(HUF PAN yet to be received that's why)?
Please let me know if I am missing anything from income tax point of view. Thanks & Regards
09 July 2024
Here are the considerations for your situation regarding the registration of an under-construction property with HUF (Hindu Undivided Family) as a co-owner, along with your wife, and the implications from an income tax perspective:
1. **Registration with HUF as Co-owner:** - Yes, you can register the property with HUF as a co-owner along with your wife. There are no restrictions on an HUF being a co-owner of property. However, ensure that the funds used for payments are from personal savings and not from the HUF funds, as HUF funds should be used for HUF-related expenditures to maintain proper separation of income.
2. **Income Clubbing on Rental Income:** - According to income tax laws in India, if an individual transfers an asset (such as property) to an HUF without adequate consideration or to a minor child, any income derived from such asset is clubbed with the income of the transferor (you, in this case) and taxed accordingly. Since you are not transferring the property but jointly owning it with HUF, rental income derived from the property will be taxed proportionately based on each co-owner's share. - Rental income will be taxed separately for each co-owner (you, your wife, and HUF) based on their respective ownership share in the property. Each will be taxed based on their individual income tax slab rates.
3. **Agreement of Sale and Registration:** - It is advisable to have both your wife and HUF mentioned in the Agreement of Sale to clearly establish their ownership rights from the beginning. This can help avoid complications later during registration and also ensures that all parties are aware of their rights and responsibilities. - If the HUF PAN card is not yet available, you can proceed with including HUF in the Agreement of Sale with the understanding that the HUF PAN details will be provided before or at the time of registration.
### Additional Considerations: - **Source of Funds:** Ensure that the funds used for the property payments are from personal savings and not from HUF funds, as mixing personal and HUF funds can complicate tax matters.
- **Tax Planning:** Consult with a tax advisor to optimize tax implications and ensure compliance with income tax laws based on your specific circumstances.
By addressing these points, you can proceed with clarity regarding the registration of the property with HUF as a co-owner and understand the potential income tax implications related to rental income.
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