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Gift from huf to its members

arpit (Manager) (247 Points)

19 February 2015

If any agricultural property which is owned by an HUF is compolsurily acquired by government and the compensation amount received by HUF is transferred to its members by way of gift, and the members inturn make FD's out of that gifted amount and earn interest income in their individual name. My query is that is it possible to do so, can huf make a gift to its members and if yes, will any clubbing provisions apply. Please confirm.

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3 Replies

Vishal Goel (Chartered Accountant) (1693 Points)
Replied 23 February 2015

Hello,

Gifts under section 56(2)(vi) of the Income Tax Act, 1961

Where any sum of money, the aggregate value of which exceeds Rs.50,000, is received without consideration by individual/HUF, the whole of aggregate value is taxable as income from other sources.

But,gifts are not taxable even if value is greater than Rs.50000/- if Gifts received from Relatives.

HUF is not relative as per relative defination.

It will be taxable in member's hand as income form other source.

Vishal Goel (Chartered Accountant) (1693 Points)
Replied 23 February 2015

hello,

Clubbing provision will not apply. FD interest will also taxable in member's hand.

Vishal Goel (Chartered Accountant) (1693 Points)
Replied 23 February 2015

Hello,

Under Section 10(37) of the Income Tax Act, Capital Gains on compensation received on compulsory acquisition of urban agricultural land is exempt from tax.