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Transfer funds to newly created huf account

Tax planning 1981 views 1 replies

Sandeep Bajaj

Assistant Manager - Internal Audit

24 Points Joined March 2014

Hi There,

As the Karta of a newly formed HUF - i would like to know the best way to transfer funds to my HUF Account.

Can the Karta directly transfer funds to the HUF from his personal account. If the funds generate income in HUF, then would the HUF income be clubbed with the Karta's personal income?

Can we show a loan given by the Karta to the HUF Account? and then pay minimal interest to Karta.

Please let me know the best way to go about this. At times, it gets really confusing and even my CA is unable to give a satisfactory reply

Thanks a lot

Sandeep

Replies (1)

In my opinion HUF & Individual are two separate entities, HUF cannot receive or give gifts. hence an individual has to transfer funds to huf as way of loan. providing interest is optional, you can treat the same as interest free loan. if the funds thus received by HUF are invested the interest received would be taxable to HUF alone as there are 2 PANs 1 for individual and the other for HUF. Hope the above helps, you can wait for others to reply and take an informed decision.