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Property gift to HUF

Ankit (Practicing Chartered Accountant) (43 Points)

22 June 2024

Can a Karta of HUF transfer a property in his name to HUF as a gift? if yes then is there any requirement to make a gift deed? please provide format for same.

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22 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (195176 Points)
Replied 22 June 2024

Transfer of property requires gift deed to be registered at Sub-registrar office. Stamp duty & registration charges payable.

After all that clubbing provision u/s. 64(2) IT act, remains intact.

Seetharaman (doctor) (87 Points)
Replied 15 September 2024

I am a NRI. My Wife as a Co Parcener of the HUF transferred some shares ( Worth in excess of Rs 50,000) to the HUF as a Gift. Post Transfer, WE came to know that although there will not be any Gift Tax, but in future, upon sale of the shares by the HUF the Capital Gains will be Clubbed to my wife. We do not want any Clubbing of income.

ON a separate note, We also understand, Gift of shares to Relatives (her mom or my Mom) is both Tax free and there is No Clubbing of income.

In this circumstances, Can the HUF Gift those shares to either her mom or my Mom, (who are not members of the HUF) as relatives, without any Gift taxation ?

If the above is not feasible, can the shares be Gifted back to my wife from the HUF without any Tax issues and later she can Gift the shares to the relatives( Her mom or my Mom) without clubbing provisions?

Many thanks for the advice

Seetharaman

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (195176 Points)
Replied 15 September 2024

As per rule the shares in the HUF account are not its own property, so if it gifts back to your wife it will be taxable. (leave aside any other person).

But if you consider it as asset given for safe keeping as deposit, it can be given back on demand to the owner.

Depends upon the documents prepared at the time of transfer to HUF account.

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Seetharaman (doctor) (87 Points)
Replied 15 September 2024

Do you mean to say, any Gift from the HUF , even to the Co Parceners of the HUF , is taxable? even though the shares was Gifted to the HUF by the Co parcener.

When you say taxation, do you mean Gift tax or Capital Gains tax?

If you mean Gift tax, will it be when the shares are sold after receipt by the Co parcener or upon receipt from HUF itselves ?

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (195176 Points)
Replied 15 September 2024

Yes, because it is not HUF property for tax liability.
There is no gift tax, only capital gain tax liability.
Gift tax does not exist. Whenever shares are sold or transferred, capital gain tax liability u/s. 112A IT act (assuming long term holding) will arise where 1.25L is exempt.

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Seetharaman (doctor) (87 Points)
Replied 16 September 2024

Thanks for clarifying that there is NO GIFT tax via Gift transfer of the shares to the member of the HUF ,from HUF and that the Receipient ONLY has to pay the Capital gains tax whenever shares are sold.

In this case, Can you , kindly Guide us, asto - If the Shares are Gifted from the HUF to Blood Relatives (Mother of Karta or Mother in law of the karta) , who are NOT MEMBERS of HUF, will there be a GIFT tax at all?

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (195176 Points)
Replied 16 September 2024

In either case capital gain tax liability will arise.

refer https://www.caclubindia.com/forum/huf-income-from-commission-609852.asp?offset=2

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (195176 Points)
Replied 16 September 2024

It is controversial issue. AO will tax it in the hands of HUF, with option for appeal against the order.

Refer: https://www.caclubindia.com/articles/gifts-to-and-from-huf-20454.asp

As on date any sum received by members from their HUF is taxable, if

i) It is above threshold limit as provided in Section 56(2)(vii); and

ii) It is not in conformity with conditions prescribed under Section 10(2).

In other words, if conditions stipulated in 10(2) are complied then the income itself will not be included in ‘total income’ and thus it will not reach to the stage of charging/exemptions under Section 56(2). Thus, in context of above statement, for making the income, being received by individual from his HUF, taxable in hands of individual, there should be a non-compliance of conditions of 10(2) and amount should exceed R50,000/- in aggregate.

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (195176 Points)
Replied 16 September 2024

Our query was based on gifting the shares by HUF to its member/s or coparcener; and based on that above reply is given. There is no type error in answer, it is the summary (point no. 4) as from the liked artical.

To HUF only its memebrs are relatives, there is no concept like blood relative to HUF.

Any gift by HUF to any other person is taxable.

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Seetharaman (doctor) (87 Points)
Replied 16 September 2024

Many Thanks for the reply . Appreciated.

In the above , especially in the last sentence, you have said "Any gift by HUF to any other person is taxable" Do you mean Gift Tax here? If so, How much is it and who will have to pay it, please

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (195176 Points)
Replied 16 September 2024

Wherever gift tax is mentioned, consider it as capital gain liable over the value of asset.

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Seetharaman (doctor) (87 Points)
Replied 16 September 2024

Many Thanks... In nutshell, I understand , be it a

Member of Huf

Non Member of HUF .

Shares (assets) can be Gifted, to either of them. There are No restrictions, Ofcourse with the consent of the members and Co parcenors.

In both the cases- both Members and Non Members- There is NO Gift Tax involved for the shares that are Gifted.

Only Tax that needs to be paid will be CAPITAL GAINS, upon sale of the shares that has been gifted over the value of the asset.

Is it my correct Conclusion and understanding from the discussion , we had, please

Many Thanks

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (195176 Points)
Replied 16 September 2024

The understanding is based on gifted shares of HUF, and not for shares acquired by HUF's own capital !!!

Seetharaman (doctor) (87 Points)
Replied 16 September 2024

Excellent. Many Thanks for your patience, detailed response and Guidance

on the individual scenario on HUF Gift and Capital Gains based on the

A. Gifted shares to the HUF by the Coparcenor and

B. subsequently by the HUF to non member, but a blood relative

C. and not for shares acquired by HUF's own capital.

wherin, this is entirely possible with No legal or Tax man clutches and that there is No Gift Tax and there will be Capital Gains Tax only upon disposal of the Gifted shares.

Many Thanks for clarity. Appreciated

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