Creating huf under given conditions

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This query is : Resolved

RV (Querist)

09 November 2011 Hi,

I want experts' opinion on the benefits of creating an HUF in the given case. Please consider these facts, where Om is the eldest male in family.

1. Om is salaried and by 80(C) deductions and home loan repayment and HRA adjustment, reduces his tax liability to almost NIL.

2. Om's wife is also earning and avails exemption under 80(c) fully to reduce tax liability to minimum.

3. Om's children are minor. Om's Father-in-Law and his parents gift around 2 lacs in total every year to his 2 children(by cheque)

4. Om would like to invest this money for his family's future needs.

Given these facts, would it be advisable for Om to start an HUF and receive gifts in the name of HUF and invest from HUF, to save tax earned on these investments.

Would it be simple enough to create and run this HUF and file its returns by an individual like Om himself, given the amount of gifts received and invested every year.

Please advise if there are any drawbacks/problems in doing so, and if it can be done without needing regular help of tax professionals.

Thanks a lot.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

09 November 2011 In my view, gifts received by children should not be treated as gift received by the HUF as income of minors is clubbed in the hands of parents.
.
It can be argued by the ITO that the income on gift received would ultimately be clubbed in the hands of the parent, having higher income.
.
It is better to take gift in the name of HUF
directly.

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