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Huf - professional income

Harman Sodhi (Senior Manager - Gurpreet Singh & Co. (Chartered Accountants)) (36 Points)

12 January 2016

Dear Experts,

We all are familiar with HUF, its creation, its Karta, Rights, Taxation etc.

My Question here is can HUF run a Professional Services and get it taxed as business income under Income Tax Act.

Eg. HUF in which Father (Karta) is a doctor along with his two sons (also doctors). can this HUF earn business income by way of professional services rendered by the members of the HUF.

Eg. HUF in which Father (Karta) is a Financial Lawyer with his two sons (One CA and another CS). can this HUF earn business income by way of professional services rendered by members wrt efiling of various returns and assisting in project planning and project financing.

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10 Replies

CA Mehul Chudasama (Chartered Accountant) (618 Points)
Replied 12 January 2016

Some services are personalized services.Some services may not be personalized service. Ttarget='_blank' rel='nofollow' hrefore, income from personalized service can not be attributed to HUF income. Sevices of doctor are in the nature of personalized services. I think you can not apportion you income to HUF income. so service as a doctor is personalised service

1 Like

Harman Sodhi (Senior Manager - Gurpreet Singh & Co. (Chartered Accountants)) (36 Points)
Replied 12 January 2016

Thank you for the quick resonse,

I am familiar with the concept of personalized services.

Lets Take a case where the Doctors Family is running a Nursing Home under the HUF. On the visual level the three doctors (Father & two Sons) are giving there personalized services to the HUF for running the business.

Now the income of the Nursing home from its patients would be taxed in the hands of the HUF or in Individual hands of the Three Doctors.??

CA Mehul Chudasama (Chartered Accountant) (618 Points)
Replied 12 January 2016

First thing i want to say that HUF can not provide any professional services... so to avoid this complication better to divide the patient income between father and two son and two son as his professional income. it will taxable in the hands of individual and not HUF

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CA Mehul Chudasama (Chartered Accountant) (618 Points)
Replied 12 January 2016

to taxability in the hands of HUF need some business income and not the professional income

Harman Sodhi (Senior Manager - Gurpreet Singh & Co. (Chartered Accountants)) (36 Points)
Replied 12 January 2016

Running and Maintaining of Nursing Home and/or Hospital in case of Medical Profession

Running and Maintaing business of efiling of various forms (ITR, eTDS, Sales Tax, Intellectual Property etc).

Both are considered as Business under the Income Tax Act.

** professionals and indirectly related to such businesses.

1 Like

CA Mehul Chudasama (Chartered Accountant) (618 Points)
Replied 12 January 2016

in case of running Hospital their are hiring services of professional and paying them as professional fees... so whatever income is left it's business income

Nirmal (Financial Analyst) (24 Points)
Replied 19 June 2017

Hello Sir/Madam,

I wanted to know if HUF can show Insurance Commission as its still being a family business selling Insurance as a services to various contacts within Family, friends, other known contacts, other leads generated thru known contacts.

Example: Person X, Y & Z are part of HUF. X being Karta taken Insurance License Examiation. All members of HUF are procuring Insurance proposals & leads to Commission Income Generation. In this case is it fair to use HUF PAN for Taxation?.

Thanks,

Nirmal

(nkradha @ gmail.com)

Chirag (Article trainee) (32 Points)
Replied 21 September 2021

can someone help me with a case law in this regard?

Chirag (Article trainee) (32 Points)
Replied 21 September 2021

can someone help me with a case law in this regard?

debora M (BUSINESS DEVELOPMENT MANAGER) (1697 Points)
Replied 22 November 2021

Even if you create a HUF, professional income, and the rental income would be taxable in your individuals' name only. And also a HUF cannot have salary income. Since professional income would depend upon your personal skills & abilities and the rental income would be charged in individuals hands as per sec. 64(2).

The income tax slab for HUF is same as that of an individual, with an exemption limit of Rs 2.5 lakh and qualifies for all the tax benefits under Section 80C, 80D, 80G and so on. It also enjoys exemptions under Section 54 and 54F with respect to capital gains.