Karta to huf gift

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Sw (Querist)
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09 July 2011 Can induvidual's profit be gifted to huf of that individual? If yes any tax liability to it? Or individual can donate any amount he wishes to his huf with out any tax burden on huf?

U S Sharma

U S Sharma (Expert)
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10 July 2011 does it solve any purpose?
there is no bar to gift from karta to huf

but

clubbing provisions will get initiated and whole the HUF benefits would get in trouble due to this one transaction, as every HUF transaction is identical to individual, and once clubbed, the HUF benefits would feel hardship.

Sw (Querist)
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10 July 2011 I want to be more specific as follows,
1) HUF & karta in individual capacity is in partnership firm.
2) No bank is giving credit facility to HUF partnership firms.

TO counter this can Individual gift his capital or 90% of his capital to HUF & reconstitute partnership deed after removing HUF from partner ship, & keeping incresed capital of HUF as unsecured loan in firm & give interest to it,
For this to be done, individual able to gift his part of capital tax free to HUF. Is it possible?

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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10 July 2011 For the purpose of Bank the capital as well as loan of the family member is treated as contribution of partners and partners.

When Individual is a partner he can introduce as much amount as he want to be his capital let the HUF contribute a small amount it is not material. Bank is concerned with total capital.

If you gift the capital of HUF then provisions of section64 will come in to play and the income arising from the transfer of the capital by individual will be taxable in the hands of individual only.

This does not serve you purpose. Better you take a loan from Individual in the name of HUF and introduce the capital in the firm if it is so required by the bank. The loan shall be free of interest provided it is not borrowed by the individual.

U S Sharma

U S Sharma (Expert)
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10 July 2011 I want to be more specific as follows,
1) HUF & karta in individual capacity is in partnership firm.

- Individual and karta of HUF, both are same persons, how they can be partner?

2) No bank is giving credit facility to HUF partnership firms.

TO counter this can Individual gift his capital or 90% of his capital to HUF & reconstitute partnership deed after removing HUF from partner ship, & keeping incresed capital of HUF as unsecured loan in firm & give interest to it,
For this to be done, individual able to gift his part of capital tax free to HUF. Is it possible?

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This will generate complications only, 1st remove HUF from partnership deed, consider the capital of HUF introduced as loan to partnership business, then introduce the fresh capital of individual in partnership firm,

hope this will give you a proper route.

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