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Individual to huf loan

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ajay123

manager

40 Points Posted on 27 March 2012

Please confirm:

1. Can individual give interest free loan to HUF

2. If HUF invested same amount recived from individual in Bank FD and erned interest amount on that so intrest erned by HUF will be of HUF only or individual.
2. whether section 64[2] will be applicable in this case because individual has given interest free loan.

thanks

Replies (2)

Sonam Bidasaria

770 Points Posted on 27 March 2012

In that case, interest received on FD will be taxable in the hands of HUF and Sec 64(2) will not be applicable.

CA Ankit Totla

Practicing Chartered Accountant

469 Points Posted on 27 March 2012

Ajay, Loan is a completely different transaction. Section 64 says that income to be clubbed if the income earning asset is transfered without adequate consideration.

In case of a loan, the asset is not transferred but still belongs to the individual.. hence clubbing would not be attracted and will be taxed in the hands of HUF.