Interest free loan to huf

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This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

18 August 2011 I have taken tax free loan from my dad from his retirement benfits by cheque which i have not paid back. I have put my funds in my huf as tax free loans which can be clubbed under section 64(2) so can i make adeed by my father saying my dad has given the loan amount paid to me as gift to my HUF from date of huf formation. and the rest money which i have given to huf can i make a gift deed by myself karta to my huf and avoid clubbing provision

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

19 August 2011 If you gift your individual property in HUF then also income arising on such converted property is liable to be clubbed with your income.
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First, it is advisable that the money of father should be returned back to him, and if funds are required in HUF he directly
can give the loan at nominal rate of interest to the HUF.
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Father is now a senior citizen, and it is possible that the interest received by him from HUF if added to his pension income
(in case he is getting the pension), may not cross the taxable limit. He further can avail benefit U/s 80C, 80CCF also.
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Your HUF will also be able to claim the interest paid as an expenditure from its business income, if there be any.

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