Depositing money in to your huf account from your salary a/c

Tax planning 17278 views 3 replies

Jyotindra Thakar

Working as Manager (Export-Import)

116 Points Joined January 2009

Dear Friends,

I have a query regariding HUF accounts. It is well known fact that opening HUF account is a very good tool for tax minimising / Planning. I have a few queries regarding HUF account. Kindly help get answers to all these questions.

(1) If a person has got only high salary income (say 10 to 15 Lacs per annum) and no income from other sources like rent, business etc, how he can deposit money in to his HUF account. Obviously, money he will transfer from his salary account to HUF account will be tax paid money. ( TDS already deducted on salaries & if TDS is not deducted, he will be paying income tax while filing his income tax return.)

(2) Is there any limit on transferring money in to HUF account by coparceners and members from their respective income tax paid incomes ? If yes, what is the limit.

(3) My understanding about this issue is, you can deposit upto Rs.300000 in to your HUF account and no tax liability will be there on HUF.(considering Rs.200000 tax exemption limit and Rs.100000 investment by HUF under sec 80C. But, what if coparceners and members deposit their income tax paid income in to HUF account. That also will be considered as income for HUF ?

(4) What type of expenses can be made from HUF account and whether the same will be exempted from HUF Income.

(5) What if someone wants some money from HUF account for his individual use / expenses etc.

(6) To my knowledge section 64 (2) relates to clubbing of income of an person if he receives some income in his individual Account and some additional income in his HUF account. But, will this section apply if a person / member / coparcener deposites money in to HUF account ?

Thanks in advance for your answers.

JYOTINDRA THAKAR

Replies (3)

Sameer

Manager

29 Points Joined March 2009

Some interesting questions. No one has replied yet. Any thoughts from experts?

Ankush Gupta

2 Points Joined November 2016

My understanding is that if a co-parcener adds his tax paid income to the HUF, it would be treated as gift from members of the HUF, which are completely tax free.

The basic premise of the HUF is that you cannot add income from Salary to this account. It has been created to adjusted for income from assets at the outset that belong to the whole family, for eg, a property that belongs to the grandfather and has his sons, daughter and grandsons as heirs.

CA ASHISH N. BODA

A N BODA & CO.

2 Points Joined June 2014

The money transferred by the Karta of the HUF may either be treated as loan if the same is intended to be repaid or it can be treated as gift if the money is not intended to repaid. As per Section 56(2) any gift received from specified relatives is tax free in the hands of the recipient. A member of the HUF is treated as relative of the HUF hence there is no tax implication at the time of the receipt of the money for HUF. However, due to the clubbing provision income earned by the HUF on the money gifted by its Karta will be treated as income of the Karta and will be added to his income year after year. The clubbing provisions will apply till the assets of the HUF are fully partitioned. Please note that it is only income on the asset transferred which will be subject to clubbing provision and not the income earned on the income which will be clubbed under the clubbing provision. If the money is treated as interest free loan, there is a likelihood of the assessing officer applying the clubbing by invoking the provisions of Section 60 for transferring the income without transferring the asset because giving of interest free loans may be treated as transferring of income without transferring the asset.

CA Ashish N Boda