Taxability of huf

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CA.Ashutosh (Querist)
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11 June 2014 Dear sir
Greetings of the day

Sir this is CA Ashutosh shukla i want to take ur guidence on the following matter.

Sir my land lord is a government servant he is in receipts of salary income. His son is in receipts of house property income and his wife too is in receipts of house property income. And all are filied their income tax return for the last a/y

My question is that whether the land lord can constitue the HUF for the current A/Y if yes then how, if they filed their return individually for the last A/Y and if they have not filed their return individually.

Further the land lord want to take home loan after two year from now. whether it will be beneficial for him as individual or HUF and what will be tax implication and in the interest of the land lord.

Therefore plz sir guide on this matter i will be remain faithfull to you as i started my practice three month earlier. SIR its very urgent

Thanks/regards
CA Ashutosh Shukla

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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14 June 2014 First of all you should know whether your client is eligible to form a HUF. If he is Hindu governed with Mitakshra school of Hindu Law then yes but if he is governed with the Dayabhaga school of Hindu Law then NO. If he is Muslim or Chirstan or Parshi then also he cannot.

Coming to how the HUF can be formed? Let me tell about the brief that a Hindu is born in 2 status i.e one Individual and the other is HUF. Till marriage he does not have any co-partioner to claim share in the property but once he is married he can form his HUF. To form HUF either he receives Gift from his father or mother and from the HUF of his father otherwise it will hit the provisions of Section 171 (this is no more). You have to draw a Gift deed in which it must clearly be written that the gift is not meant for individual but it is for the benefit of the family of the son at the same time the HUF so formed can take loan from others for the business and file the return.

In doing so the other problem which might come on the way is the person is a Government Servant and it is a rule that he must disclose the income earned by the other members of his family to the Government other wise he might face some problem in long run. So ask your client to make true and proper dis-closer.