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Gift by Kata to HUF

16 January 2021

Pls let me the provisions applicable for FY 20-21 for the following:-

1. If a Karta gives a gift in cash through bank transfer to his HUF, it is liable to tax?
2. Can a Karta give interest free loan to HUF?
3. Is the income so accrued to the HUF after investing the amount received as gift/loan to HUF clubbed in the hands of the karta?

Relevant sections/ case laws from would help.

Best Regards
Rajiv

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12 Replies

CA. Sourav Sarkar (Chartered Accountant ) (24578 Points)
Replied 16 January 2021

If gift transfer to HUF exceeds 50000 rupees in cash then it is taxable otherwise than cash mode will not be taxable.

Yes karta can give interest free loan to HUF

Yes as per clubbing provisions it is taxable under the hands of transferor

Kapadia Pravin (17249 Points)
Replied 16 January 2021

HUF is defined to be within the term of relatives and hence Gift is possible by Karta to his HUF. INCOME thereon will remain in the hands of HUF and taxed too in hands of HUF.

Krishna Chaudhary (Accountant) (4531 Points)
Replied 16 January 2021

1. not taxable since received from relative.

2. yes he give

3. not clubbed

2 Like

CA Rajiv Poddar (k) (65 Points)
Replied 16 January 2021

As per Section 56 (vii), "where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009 but before the 1st day of April, 2017,......."

Again as per Section 56(x), "where any person receives, in any previous year, from any person or persons on or after the 1st day of April, 2017,—............"

Therefore, the act has specifically removed the words HUF. In this light can gift from karta to HUF in excess of 50,000 still be tax free?

Kapadia Pravin (17249 Points)
Replied 17 January 2021

HUF members are all qualify as relatives each other and hence HUF itself is termed as relative and well within definition.

Krishna Chaudhary (Accountant) (4531 Points)
Replied 18 January 2021

In income tax there are no clubbing provision for HUF and karta.
So Karta can gift any amount to HUF.
SINCE KARTA IS RELATIVE SO THE INCOME WILL BE EXEMPT IN THE HANDS OF HUF.

AND FROM H U F POINT OF VIEW ANY INCOME EARNED FROM THE GIFTED INCOME WILL BE TAXABLE IN THE HANDS OF H U F ONLY.

NO CLUBBING PROVISIONS WILL BE APPLICABLE

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