Huf capital arrangement

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Vivek (Querist)
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30 September 2012 Dear Sir,
Suppose a huf wants to start a business and in this regard it need a capital of Rs. 5 lacs. Then it is good to receive gift of Rs. 5 lacs from the members of huf or it is better to receive unsecured loan from its members at 0% interest.

Please advise me.

Amol S Joglekar

Amol S Joglekar (Expert)
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30 September 2012 The gift by the members shall go to "COMMON HOTCHPOT" for HUF. In that case the HUF rules will start getting applied for this. Alternatively if you show it as unsecured loan, the members can claim the same from the HUF. From income tax point of view both has same effect.... NO TAX for this transaction in either case.

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