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Query regarding cash gift by a member to huf

4jan1992 (Proprietor) (21 Points)

29 January 2019

if karta is gifting rs 500000 cash gift to his huf as capital,will the clubbing provisions of section 64(2) apply to income that will be earned by investing this 5 lakhs?and if the clubbing provisions apply then please tell me how to introduce the capital in huf coz clubbing will defeat my purpose of making huf

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2 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (185582 Points)
Replied 29 January 2019

Clubbing of Income Of HUF{SEC. 64 (2)}

Where, in the case of an individual being a member of a Hindu undivided family, has converted his self-acquired property 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), the income arising from such converted/transferred property shall be dealt with in the following manner:

1. The entire income from converted/transferred property shall be taxable in the hands of the individual (transferor)

2. If the converted/transferred property is subsequently partitioned amongst the members of the family, the income derived from such converted/transferred property as is received by the spouse of the transferor will be taxable in the hands of the transferor

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Sandeep Ahuja (39 Points)
Replied 26 September 2019

Yes 64(2) covers cash, movable and immovable property. To avoid clubbing it is better to show cash given by karta as LOAN BY KARTA TO HUF. Even if HUF earns investment Income on such loan, there will be no clubbing as 64(2) N.A on loan transactions. Even if HUF does NOT pay interest on loan to karta, there will be NO TAX CONSEQUENCE and investment income will be taxed only in hands of HUF.