Home Loan to HUF

The reason being not many people are aware of HUF and its status.

You can take the loan jointly in the name of the HUF and yourself. Or you can tell them that you will be the guarntor for the HUF Property.

You will receive all the benefits that are available to the HUF in either of the options.

Originally posted by : Ritesh
	I have sold an HUF House Property, a property that I bought from inherited money and showed as my HUF property. The HUF's members are self as Karta, Wife, Two kids 12 and 9 yrs.  Now to avoid long term capital gain I have to invest the amount in a house property.  But Banks are refusing to give Home Loan to HUF.  They have no problem in giving the loan to me as an individual so the capacity to pay is not in question.  What all options do I have?  If I refelect the property as owned by me then the returns filed till date for HUF in which rental income was shown from this property being sold become false.  What are the courses of action available to me?

1) you had an house property ( ancesteral) and enjyed the HP income under HUF capacity

2) you sold the HP property under HUF capacity and now availed LTCG

3) you want to avail sec 54 benefit + bank loan

4) bank is refusing to offer loan as HUF but in individual capacity Bank is ready 

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There is no bar to get new property in your or any HUF members name on which bank is ready to finance, the only fact to claim 54 exemption that ...........you should transfer funds from HUF account of sale proceeds for acquiring new property ( not mandatory to get registered under HUF name, it may be in any members name)

Dear Sir,

As you advised the property need not be registered under HUF name, I take it then that it will be register in joint name of adult members of the HUF.  For which financing by banks is not a problem.

If the property is not registered in the name of the HUF the provisional certificate issued by lender at the end of FY, giving details of Principal and Interest deducted on basis of which I will claim loss from House property will not have HUF mentioned in it.

Can I still use it in the IT Return being file for HUF?

Can any Query from IT Dept later be satisfied by this arguement?

1) you asked the query for utilization of LTCG made by HUF which is resolved

2) the property would be in name of members only, not in name of HUF be clear

3) after utilization of LTCG proceeds HUF chapter for property is closed.( unless its sold within three years of acquisition)

4) any house property income/ loss would go to new owners account only, and would be accounted in hands of new owners tax file.

Sir,

Ref your last response Para 3 & 4 mean - in affect it is liquidation of HUF. As then there can be no income source for HUF nor any property / corpus. Also HUF cannot be created again.Though tax on LTCG has been avoided but the new property purchased from the proceeds will now become indl property.  Thus gain or loss will only add to the current income of the new holders.  The benefits of rental being accrued to HUF income and thus tax benefits of the loan against property cannot be utilized by HUF.

sorry, tried to help you to my possible extent, but looks you are fixed with HUF and not ready to enjoy the incometax benefits, 

pay the LTCG on hands of HUF as HUF is not entitled to enjoy sec 54 benefits ! 

Exemption from capital gains arising from transfer of a house property used for residence - Whether available to Hindu undivided families

1. A question has been raised whether the relief provided under section 54 in respect of capital gains arising from the transfer of a house property used for residence on fulfilment of certain conditions is available to a Hindu undivided family. In other words, whether a Hindu undivided family which transfers any house property; which was being used by it for residence of its members during the two years immediately preceding the date of transfer and purchases a new house property within one year of the date of transfer or constructs a new house property within two years (now three years) from the date of transfer, is entitled to relief provided in section 54 in respect of the capital gains arising on the transfer of the said house property.

2. We have been advised that the language of the section, particularly the expression “was being used by the assessee or a parent of his mainly for purposes of his or the parents’ own residence” cannot be interpreted so as to extend the relief to Hindu undivided family also. It is, therefore, clarified that the relief under section 54 is available only to the individual transferring house property and fulfilling the conditions mentioned in the section and not to the Hindu undivided family.¹

https://law.incometaxindia.gov.in/DitTaxmann/IncomeTaxActs/2009ITAct/sec_054.htm

My Apologies sir.  I did not mean to offend you. 

I was not aware of the fact you brought out - relief under section 54 is available only to the individual transferring house property and fulfilling the conditions mentioned in the section and not to the Hindu undivided family.

I wanted to enjoy the tax benefits in future too on the Home Loan along with Sec 54 currently.

Thanks a lot, you have been very helpful even earlier.  Request permit me to bother you again in future.

Benifit under sec. 54 is available to HUF also. the wordings of sec. 54 are "Subject to the provisions of sub-section (2), where, in the case of an assessee ² being an individual or a Hindu undivided family], the capital gain arises from the transfer of a long-term capital asset"

Also the position has been existing since 1.4.1988.

I advice here non finance professionals to not to give any advice which they are not aware of. This reduces the credibility of forum.

Anuj

+91-9810106211

Purchase of new house

Date of purchase - For the purpose of section 54, the date of agreement to purchase should be taken as the date of purchase and the date of registration of sale deed for purchase is not relevant - CIT v. R.L. Sood [2000] 108 Taxman 227/245 ITR 727 (Delhi).

Purchase need not necessarily be on ‘cash and carry’ basis - The word ‘purchase’ in section 54 must be interpreted in its ordinary meaning, as buying for a price or equivalent of price by payment in kind or adjustment towards an old debt or for other monetary consideration. There is no stress in the section on ‘cash and carry’. Thus, where the eldest brother in a coparcenary comprising four brothers sold his own house and acquired the common house from his three brothers who executed release deeds for a consideration, there was a ‘purchase’ by the eldest brother of the share of each of the brothers for a price - CIT v. T.N. Aravinda Reddy [1979] 1 Taxman 40 (AP)/120 ITR 46 (SC).

‘Purchase’ does not mean that the new house must be registered in assessee’s name - For the purpose of attracting the provisions of section 54, it is not necessary that the assessee should become the owner of the property purchased. The word ‘purchase’ occurring in section 54(1) has to be given its common meaning, viz., buy for a price or equivalent of price by payment in kind or adjustment towards a debt or for other monetary consideration. Therefore, for the purpose of applicability of section 54, registration of the document is not imperative - Balraj v. CIT [2002] 123 Taxman 290/254 ITR 22 (Delhi).

Holding of legal title within prescribed time is not a pre-condition - Taking into consideration the letter well as the spirit of section 54 and the word ‘towards’ used before the word ‘purchase’ in section 54(2), it seems that the word ‘purchase’ is not used in the sense of legal transfer and therefore, the holding of a legal title within a period of one year is not a condition precedent for attracting section 54 - CIT v. Dr. Laxmichand Narpal Nagda [1995] 211 ITR 804 (Bom.).

Date of taking possession relevant for computing time-limit - Date of taking over possession of property purchased, and not the date of registration of sale in favour of the assessee, is relevant for computing the prescribed time-limit - CIT v. Mrs. Shahzada Begum [1988] 173 ITR 397 (AP).

Purchase of portion of self-occupied house is also eligible for exemption - Section 54 nowhere states that a residential house which is purchased by the assessee so as to avail the exemption should not be the one in which the assessee was residing. One cannot argue that assessee is not entitled to exemption under section 54 merely because the assessee was residing in the house which was purchased by him.

Thus, where the assessee sold a house property owned by her and out of the sale proceeds purchased 15 per cent share in another house property owned by her husband and son, exemption was allowable even though the assessee was residing in the said house prior to purchase, and continued to reside in the same house after purchase - CIT v. Chandanben Maganlal [2002] 120 Taxman 38 (Guj.).

https://law.incometaxindia.gov.in/DitTaxmann/IncomeTaxActs/2009ITAct/casesec54.htm

https://law.incometaxindia.gov.in/DitTaxmann/IncomeTaxActs/2009ITAct/%5B2002%5D123Taxman0290(Delhi).htm

Originally posted by : CA. Anuj Gupta
	Benifit under sec. 54 is available to HUF also. the wordings of sec. 54 are "Subject to the provisions of sub-section (2), where, in the case of an assessee 2 being an individual or a Hindu undivided family], the capital gain arises from the transfer of a long-term capital asset" Also the position has been existing since 1.4.1988. I advice here non finance professionals to not to give any advice which they are not aware of. This reduces the credibility of forum.   Anuj +91-9810106211

Dear sir , 

suo moto, the assesee want to utilize the LTCG achived by sale of property under HUF capacity and side by side want to avail a bank loan for new property, where the assessee want to invest the LTCG+ Bank loan

Banks are disagreed to offer a loan, in capacity of HUF, but in individual capacity he can avail a loan.

i accept that the rules got changed sometimes later as per your findings ( though I am unable to find any notification to this effect) to extend benefit to HUF, however in absence of loan he can not buy new property,

I request you humbly to produce any good solution to this query, so that the assesee can resolve the prob without any hurdle with either tax department , or with bank.

i have recited the facts where the HUF can enjoy the benefit of LTCG by sending the money to new property , and its not a compulsion to register in HUF name. 

balance, i m not an tax expert, but human life does not know much about tax situations, and tax experts are meant to make them easier with tax provisions and bringing them under provisions of tax laws without much damage to the main objective of the person.

will be obliged if you can enlighten the matter under your expert advise. 

Thank u sir...

@ SIR C A  ANUJ GUPTA

Respected sir,

eagerly waiting for for inputs towards solution to the query by "finance expert people", please enlight the matter with your finance expertize. this is a humble request of "a non finance people" 

awaiting your valuable inputs.