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Neerav Karia (Article Assistant ) (68 Points)

30 August 2010

Case :- If an HUF gives gift exceeding Rs 50000 to itz individual member,whether its chargeable to tax or not ?

Whether the HUF is treated as a relative of its individual member ?

Thank you for ur opinions in advance.

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9 Replies

vishnupriya (CA Final) (1418 Points)
Replied 31 August 2010

By gift of movable assets of the HUF to its members:

The Karta of an HUF cannot gift or alienate HUF property but for legal necessity, for pious purposes or in favour of members

of the family. Gift of immovable property within reasonable limits, can be made by a Karta to his wife, daughter, daughter-in-law or even to a son out of natural love and affection. Gift of immovable property within reasonable limits can be made only for pious purpose e.g. marriage of a daughter.

Therefore, if the HUF has excess funds or property, then, the Karta can make gift of movable assets to his wife, daughter or daughter-in-law at one go or over a period of time. However, it may be noted that with effect from 1.10.98, the applicability of Gift Tax is no more in force. Therefore, no Gift Tax will be payable by a person making the gift from on or after 1.10.98. However, w.e.f. 1.10.2004 Gift received from other than relatives exceeds

Rs.25,000/- then that amount is liable to Income Tax u/s. 57 of Income Tax Act, 1961. It may be remembered that gift for marriage or maintenance of daughter(s) is not liable to Gift Tax. Further clubbing provisions of sec. 64 would not be applicable if the gift in validly made in accordance with the rules of Hindu Law. Besides, if a gift made to the minor daughter of the Karta is valid then the provisions of sec. 60 of the Income Tax Act would not be attracted. CIT v. G. N. Rao, 173 ITR 593 (AP). Whereby, section 60 relates to transfer of income where there is no transfer of assets.

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vishnupriya (CA Final) (1418 Points)
Replied 31 August 2010

HUF is not liable to pay gift tax. But the receiver sholud pay gift tax as the amounts exceeds 50000/-

Why cant we say that there is natural love and affection and get relief from gift tax?

venkatraman shrinivas (Tax consultant/Tax Advocate In Practice.) (313 Points)
Replied 31 August 2010

Please refer to section 10(2) of the Income-tax Act, which provides for outright exemption of any sum received by a member of the HUF from out of the income of the family. The HUF, it is presumed from your query makes a gifa only to the members of the family. Hence it is out of consideratron of section 56(5).

Neerav Karia (Article Assistant ) (68 Points)
Replied 31 August 2010

Thanx a lot for ur concern....even i think tht the gift will b exempt in both hands....thank you for ur support people :)

Sanjay Singh Rana (CA) (208 Points)
Replied 31 August 2010

As per my view point gift will be taxable under section 56(2)(VII) since gift amount is more than 50000 and HUF being an artificial person cannot have relative. and for the purpose of income tax both karta and HUF are different persons and they are required to file their returns seprately. so if there is gift of property or cash to member it cannot be said that it is out of relation. so the whole amount will go under the head income from other sources in receiver hand.

:) thankssssssssss

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Sanjay Singh Rana (CA) (208 Points)
Replied 31 August 2010

Originally posted by : venkatraman shrinivas
	Please refer to section 10(2) of the Income-tax Act, which provides for outright exemption of any sum received by a member of the HUF from out of the income of the family. The HUF, it is presumed from your query makes a gifa only to the members of the family. Hence it is out of consideratron of section 56(5).

dear shrivinas ji

please rectify that 10(2A) provides for exemption of Share from income of HUF to its member it is not applicable in case of gifts or transfer of assets.

thanks and take care :)

venkatraman shrinivas (Tax consultant/Tax Advocate In Practice.) (313 Points)
Replied 31 August 2010

Mr.Rana,

What is it you suggest of me to rectify. I have stated section 10(2) exempts outright any sum received by a member of the HUF. The natural presumption deduced from the query is that the gift is inter vivos and interse between the members of the HUF. There is no question of application of section 56(2)(vc). I have served the Income-tax department as a very senior Officer and made several assessments, which have stood the test of appeal and time.

Sanjay Singh Rana (CA) (208 Points)
Replied 01 September 2010

sorry for earlier comment yes you are right sec 10(2) states that any sum received by an individual as a member of a Hindu undivided family, where such sum has been paid out of the income of the family will be exempt.

No treatment will be done in the hand of HUF as well as Member.

Thanks dear :)