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Taxability of ancestral property huf

04 June 2016

We have a ancestral property of my grandfather and he has three sons my father and two ncles,but transferred in name of one of my uncle but treating it as ancestralproperty.Property is still under construction but builder is paying rent for the same.My question is:-

1) Can the property be transferreed back to a jointownership kind of thing or say HUF so that it technically goes back to joint.Question is can brothers be members of an HUF.

2) Currently the rent income arriving from the property is distributed by uncle equally,so one months rent he takes other two he gives to my father and other uncle.However i believe taxability would still remain in his hand if i am not wrong.so whats the best way of tax planning in this case.

Regards

CAVishal Mehta

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3 Replies

CA Harshal Totla (Chartered Accountant) (2229 Points)
Replied 04 June 2016

point (1) As per my view the uncle in whose name property is transferred has to execute a release deed in favour of other two brothers. Brothers cannot form an HUF.
point (2) Yes the rent will be taxable in the hands of uncle in whose name property is registered,clubbing will be applicable if he transfers income from property without transfer of asset.

CA Vishal Mehta (CA) (123 Points)
Replied 04 June 2016

Thanks a lot.

1) So release deed would like joint ownership of all three.In that case it would be better right as all three would get basic exemption limit.Correct me if i am wrong

2) On sale of property also the income would be distributed in hands of all three?

Regards

CA Vishal Mehta