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HUF

VIKASH (CA FINAL 2ND GROUP) (142 Points)

01 April 2010

can individual person (getting salary) transfer his tax paid income transfer to his HUF in which he is KARTA ?

is there any clubbing at the time of assessment ?

vikash mangal

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6 Replies

Ashish Sharma (Service) (1028 Points)
Replied 01 April 2010

In my view no clubbing of tax paid income transfer to HUF by its Karta as it seems to as addition by karta

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Rachit (Analyst) (913 Points)
Replied 01 April 2010

Although it is possible for a member of the HUF to transfer his or her individual assets to the HUF, such a transfer isn’t beneficial from the tax point of view. This is because there is no transfer of the tax liability on the income from such assets. The income would continue to be taxed in the hands of the individual who has transferred the assets, due to the tax provisions governing the clubbing of such income with the income of the transferor.

Hence in your case, if cash is transferred by the individual to his HUF, the income generated from such tranfer, like interest income, capital gains etc., would continue to be taxed in the hands of the individual.

Amir (Learner) (4016 Points)
Replied 01 April 2010

Dear Vikas,

Agree with friend Rachit.

Karta is just a member of HUF & not the owner.

Just supporting his statement -Sec 64(2) -

Where, in the case of an individual being a member of a Hindu undivided family, any property having been the separate property of the individual has, at any time after the 31st day of December, 1969, been converted by the individual into property belonging to the family through the act of impressing such separate property with the character of property belonging to the family or throwing it [into the common stock of the family or been transferred by the individual, directly or indirectly, to the family otherwise than for adequate consideration (the property so converted or transferred being hereinafter referred to as the converted property)], then, notwithstanding anything contained in any other provision of this Act or in any other law for the time being in force, for the purpose of computation of the total income of the individual under this Act

(a) the individual shall be deemed to have transferred the converted property, through the family, to the members of the family for being held by them jointly ;

(b) the income derived from the converted property or any part thereof[* * *] shall be deemed to arise to the individual and not to the family ;

⁶¹[(c) where the converted property has been the subject-matter of a partition (whether partial or total) amongst the members of the family, the income derived from such converted property as is received by the spouse ⁶²[* * *] on partition shall be deemed to arise to the spouse ⁶²[* * *] from assets transferred indirectly by the individual to the spouse ⁶²[* * *] and the provisions of sub-section (1) shall, so far as may be, apply accordingly :]

Ashish Sharma (Service) (1028 Points)
Replied 01 April 2010

Dear Amir,

Agree with your above view but have some doubt in my mind every business needs money, as a proprietor, a partner or a share holder who gives the money to run a business is that money is taxable in hands of concern firm or company. as for shareholder are the members of company, the provision of clubbing is to prevent escaping tax. but her not the property but the tax paid income (salary) is transfered to HUF can this will taxable and if yes it is not a double taxation

Ashish Sharma (Service) (1028 Points)
Replied 01 April 2010

Originally posted by : Rachit
	Although it is possible for a member of the HUF to transfer his or her individual assets to the HUF, such a transfer isn’t beneficial from the tax point of view. This is because there is no transfer of the tax liability on the income from such assets. The income would continue to be taxed in the hands of the individual who has transferred the assets, due to the tax provisions governing the clubbing of such income with the income of the transferor. Hence in your case, if cash is transferred by the individual to his HUF, the income generated from such tranfer, like interest income, capital gains etc., would continue to be taxed in the hands of the individual.

Sorry, I have skip the last one its only income generated will be taxable, i totally agree with u

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Amir (Learner) (4016 Points)
Replied 01 April 2010

Dear Ashish Sir,

HUF is considered as a separate assessee for Income Tax purposes..

But the provisions of taxability of firms & HUF are not same. So the concept of introducing capital is not there in case of HUF which is there in case of Firms.

Further money can be given to HUF via "Loan" & it is not necessary to tranfer as Gift OR SOMETHING.