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HUF Gift to Karta

kings22 (Shareholder) (166 Points)

29 May 2020

1 - Can a HUF gift to Karta be taxed by Income Tax or Taxable? I am hearing mixed things so want to make sure.

2- If it cannot be a gift and should be a loan, does HUF need to collect interest or it can be interest free?

3- Is Gift declared on Income Tax filing for HUF?

Thank You
Sameer

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2 Replies

Rohit Tulshyan (158 Points)
Replied 29 May 2020

1. In Income tax act, the definition of donor relative does not include an HUF. Hence, on plain reading of law, it appears that the gift received by individual HUF members (in excess of specified limits) from the HUF shall be chargeable to tax in the hands of members.

However, certain contradictory rulings have held that such gifts should be tax-free for individual members, as HUF is a group of relatives. Hence, adopting this position that gifts received by an individual HUF members from the HUF is tax-free may be litigious.

2. there should be no tax implications on the drawing of interest-free loans by you from the HUF, provided it can be established as a genuine transaction.

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Shardul Patel (10 Points)
Replied 16 June 2020

Answer to 1
if HUF gives gift it becomes partial partition. It is better to share that years income with Members. Consent can be taken to share uneven distribution from other members. also this sharing will be exempt u/s 10(2)

Answer to 2
HUF can take or give loan with or without interest.

Answer to 3
Better to disclose else non disclosure penalty may be levied.