Tax on Gift by one HUF to another HUF

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  1. Sanjay Kumar Bhagat

    Sanjay Kumar Bhagat New Member

    Sir

    For example I am the Karta of my HUF. My brother is Karta of his HUF. We give gift of Rs. 50,000/- or more to each other HUF. Is it acceptable as per Income Tax Law. What will be the consequences of Income Tax.

    Regards
     
    Last edited: Jul 29, 2016
  2. ZED

    ZED Well-Known Member

    Your brothers HUF is not your relative and hence the gifts shall be taxable.

    Extracts from explanation to S.56(2)(vii)
    (e) "relative" means,—

    (i) in case of an individual—

    (A) spouse of the individual;

    (B) brother or sister of the individual;

    (C) brother or sister of the spouse of the individual;

    (D) brother or sister of either of the parents of the individual;

    (E) any lineal ascendant or descendant of the individual;

    (F) any lineal ascendant or descendant of the spouse of the individual;

    (G) spouse of the person referred to in items (B) to (F); and

    (ii) in case of a Hindu undivided family, any member thereof;
     
    MAP likes this.
  3. Sanjay Kumar Bhagat

    Sanjay Kumar Bhagat New Member

    1. My Spouse is member of my HUF. If she gives gift of Rs. 50000/- or more to my HUF. Is it acceptable as per Income Tax Law. What will be the consequences of Income Tax.
    2. If I give gift of Rs. 50000/- or more to my HUF. Is it acceptable as per Income Tax Law. What will be the consequences of Income Tax.
    3. If my brother's gift to my HUF is taxable then what will be slab of income tax. Further if this gift is less than or equal to Rs. 50000/- then also it will be taxable.

    With Regards

    Sanjay Kumar Bhagat
     
    Last edited: Aug 1, 2016
  4. MAP

    MAP Member

    Good Information from ZED. Here I would like to ask you a question that what are the ways to raise fund in HUF Account without IT consequences ?. This will solve all questions of Mr. Sanjay Kumar.
    MAP
     
  5. ZED

    ZED Well-Known Member

    It is allowable and the gift shall be exempt. The gift given to HUF can be treated as capital of the HUF.

    Same as above.


    Since your brother is a member of his HUF and you are a member of your HUF, the gift won't be exempt.
    Uptil 50,000 (in aggregate from ALL PEOPLE) , nothing shall be taxable.
    If the limit is crossed, then WHOLE of the amount shall be TAXABLE.
     
  6. ZED

    ZED Well-Known Member

    I will say gift by members of HUF.
    Property transfer via *will* , ancestral property.
    Other modes might be taxable

    Other mode include gifts of more than 50k by non members
    Income generation by HUF which may (or may not) be taxable.
     
  7. Sanjay Kumar Bhagat

    Sanjay Kumar Bhagat New Member

    Good Morning ZED

    My Question- If I give gift of Rs. 50000/- or more to my HUF. Is it acceptable as per Income Tax Law. What will be the consequences of Income Tax.
    Your Answer- It is allowable and the gift shall be exempt. The gift given to HUF can be treated as capital of the HUF.

    Now as per income Tax Law, the income generated by my HUF from the above money will be clubbed to my individual income. Is this correct ? Then what is the benefit of giving gift to his HUF by Karta ? Is this will be applicable to my wife and other member also ?.

    With Regards
     
  8. Sanjay Kumar Bhagat

    Sanjay Kumar Bhagat New Member

    Kind Attention ZED

    Kindly read the following conversation which were given on Nov. 14 on this site. Now kindly clarify again that gift of Rs. 50,000/- or more in cash or by cheque is made by Karta to his HUF. The income generated by my HUF from the above money will be clubbed to Karta's individual income or not !


    Can Karta gift his Personal Individual Assets to his HUF?
    1.
    Kandala PrasadNew Member
    Sir,
    1. I have created an HUF with the gift money my wife got on our anniversary from her parents. However, i would like to know if i can put some of my personal earnings (I am a salaried person who regularly files the IT returns) into the HUF through bank transfers to increase the capital.

    2. Also i would like to know the capital so created is above the exemption level in one FY how is the appropriate tax paid (through advance tax method or is there any other method?).

    3. After i pay the tax in one FY, if there are further contributions in the next FY, then how is the tax levied (on the total amount of the capital or on the portion of the contributions in that FY only?)

    I have seen that some of the threads go unanswered, I will be grateful if my doubts can be answered.

    Thank You in advance.


    Kandala Prasad,Nov 4, 2014

    #1

    2.

    Gaurav_kumarWell-Known Member
    The gifts received by the HUF from Family Members form the initial corpus of the HUF. As these gifts have been received from Family Members, they are exempted from the levy of income tax.

    Even in further years, if gifts are being received by HUF - it is exempted from the levy of income tax.

    Kindly refer this link which talks in detail about family members from whom gifts if received are exempted -http://www.charteredclub.com/gift-tax/


    gaurav_kumar,Nov 4, 2014

    #2

    3.

    Gaurav_kumarWell-Known Member
    You would only be required to pay tax on the income earned by the HUF and not on the gifts received from specified family members.

    The Income of the HUF earned in a particular year would be taxed as per the income tax slab rates. The income tax slab rates of HUF are the same as the income tax slab rates for individuals.

    Tax once paid on a certain income is not required to be paid again and again. Tax on a specific income is only to be paid in the year in which it is earned.


    gaurav_kumar,Nov 4, 2014

    #3

    4.

    Gaurav_kumarWell-Known Member
    Yes, you can gift your own personal earnings to the HUF to increase the capital of the HUF

    However, from the tax point of view - there will not be any benefit as provisions of Clubbing of Income under Section 64(2) will apply.

    This Section regarding Clubbing of Income comes into play when the taxpayer tries to divert his income to his family members to reduce his tax liability.

    And in the case mentioned by you above, provisions of clubbing of income will apply and the income arising in the hands of the HUF from your personal earnings gifted to the HUF - will be taxable in your hands and not in the hands of the HUF


    gaurav_kumar,Nov 4, 2014

    #4
     
  9. ZED

    ZED Well-Known Member

    The gift will certainly remain exempt but the income by utilizing the gift can be taxable.
    Capital of HUF can be from ancestral property or through gifts. The onr through ancestral property won't attract clubbing but gifting can attract clubbing.
    (there was an error in my previous eg)
    The text is too much to read for me now. My eyes are bit injured owing to which I am not able to read properly. I need some days to resume.
     
  10. Sanjay Kumar Bhagat

    Sanjay Kumar Bhagat New Member

    Thanks ZED for your information which I think has been given after certain research.

    What you say MAP?
     
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