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Home Loan to HUF


Ritesh (Jt Dir)     13 July 2011

Ritesh
Jt Dir 
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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?

avater

praveen (Chartered Accountant)     13 July 2011

praveen
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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.

avater

praveen (Chartered Accountant)     13 July 2011

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

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U S Sharma (glidor@gmail.com)     13 July 2011

U S Sharma
glidor@gmail.com 
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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 

-----------------------------------------------------------------------------------------------------------------

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)

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Ritesh (Jt Dir)     14 July 2011

Ritesh
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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?

avater

U S Sharma (glidor@gmail.com)     14 July 2011

U S Sharma
glidor@gmail.com 
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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.

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Ritesh (Jt Dir)     14 July 2011

Ritesh
Jt Dir 
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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.

avater

U S Sharma (glidor@gmail.com)     14 July 2011

U S Sharma
glidor@gmail.com 
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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

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Ritesh (Jt Dir)     14 July 2011

Ritesh
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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.

avater

CA. Anuj Gupta (Practices in NRI Int.Tax FEMA TP FDI/FIPB & FCRA)     18 July 2011

CA. Anuj Gupta
Practices in NRI Int.Tax FEMA TP FDI/FIPB & FCRA 
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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


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