HUF Question

Tax planning 910 views 2 replies

Mohan Shrivastav

CTO

42 Points Posted on 07 June 2011

Hi,

I have query regarding formation of HUF and how to fund the HUF so as to divide my tax burden.

My Family :
-> Me (earning 6 lacs/annum)
-> Wife (earning 20 lacs/annum). She has a sole properitory business
-> Daughter (she is just 1 year right now).

I help my wife in her business related to designing. She works from home and her clients are all over US. She has 100% export oriented income. I myself work in an IT company.

Now the question is if I form an HUF, how can I fund HUF on regular basis from my wife's business?. I was planning if she can transfer 6 lacs to HUF, then our tax burden will reduce significantly. How can I do it? Can I show it as receiving as Consulting fees but money deposited in HUF account?

If above answer is no, can I receive foreign income in HUF directly, will that work ?

Looking for your help.

Best Regards,
Mohan.

Replies (2)

praveen

Chartered Accountant

6971 Points Posted on 07 June 2011

ooo !!! OOOO hold on and read my view

It is not easy as you are thinking.

First Basic Rule: "You cannot reduce taxes by creating a HUF"

moreover you cannot transfer money to your HUF account and escape taxes.

You should have received some ancestral property or money through family partition etc to have funds in HUF.

Mohan Shrivastav

CTO

42 Points Posted on 07 June 2011

Originally posted by : praveen
	ooo !!! OOOO hold on and read my view It is not easy as you are thinking. First Basic Rule: "You cannot reduce taxes by creating a HUF" moreover you cannot transfer money to your HUF account and escape taxes. You should have received some ancestral property or money through family partition etc to have funds in HUF.

Hi Praveen thanks for your quick response. Yes I will receive gift into HUF from my father, but it will be one time and will be just Rs.1.5 lacs. So my question was how can I continue receiving benefits under HUF ? In other words what will be HUF's income source? Can HUF do business and earn? Can I as a karta provide some service to my wife's company and get paid?