Ask me anything about HUF and its taxation

Is it different in equity and intraday?

No, it would be the Karta only. The context of the question is to differentiate between investing via an HUF and trading via a HUF (be it intraday/f&o). Investing is passive and is trading is active which can be argued by the income tax authorities for clubbing it in the income of karta rather than counting it as huf income.

So the question is: Is trading in general (be it f&o/intraday) via HUF advisable - would clubbing of income be an issue there?

1 Like

@Deus12 It is very common to have a business under HUF in India. So yes, trading is allowed however, clubbing wont be applicable as a proper business ( trading in F&O ) is being done here.

Hey @Deus12,

Yes, the HUF can do F/O trading. The profits will be taxed in the hands of HUF as business income.

Hi @Quicko ,

Thank you for the revert. Does Quicko offer any 1-on-1 calls/advisory sessions where they can address the queries I might have? If so, could you please share the relevant link where I can avail them?

Also, where can I avail the tax filing service (ITR) for HUF with Quicko?


Hi @Deus12,

Yes, we do offer online tax advisory services. You can book a MEET with us using the below link.

Book a MEET

Hope this helps!

@Quicko Team, If the HUF income is only through trading equity only (excl. F&O) & FD interest, how is it taxed? Standard 15% or can claim standard tax slab? Section 80C? etc?

Hey @abvc_aeerr,

The tax rates for both individuals and HUF are the same. Hence, in case of STCG, tax will be applicable at 15% and the FD interest will be taxed at normal slab rates.

Moreover, chapter VI-A deductions are not allowed in case of capital gains. You can claim them for other incomes like salary, business income or other source income like interest, dividend etc.

Can a member and non member provide interest free loan to huf ? if yes ,what all documents are we require to maintain?

Does infusion of any amount of capital can be declared at the time of creation of HUF? Do we need to pay any stamp duty based on the amount declared? We are creating HUF on demise of my grandfather and using the cash inherited through that to infuse capital in our HUF. We have created one HUF creation deed and just mentioning source of initial corpus there.

Hey @Sumit_Lehri ,

It is not ideally recommended to give interest-free loans. You can charge a minimum interest as prescribed by the RBI.

Show less

Hey @Chait_M,

Yes, at the time of incorporation, you can pool in the capital to HUF.

Moreover, stamp duty at the applicable rates shall apply.

Hope this helps!

can we deduct interest from income ?

Dear Team, While I understand that the gift by the members to the HUF are tax exempt, the income generated from the transfered amount is still applicable for clubbing.

Lets say I am on 30% tax bracket. I gift 10L to my HUF and I am the Kartha. The HUF invest this 10L in Share Market and earns 2L profit. While the HUF need not pay any tax for the 10L, the Karta still has to pay tax for the 2L under clubbing provision.

Is that not right? If I google almost all CA blogs say that income earned from the GIFT is clubbed to the member gifting it. Which takes away the advantage.

Hey @Balaji_Prasanna,

After the HUF is formed, the members can add money to it by transferring it as a gift. Since members are considered relatives of HUF, gifts from members are exempt in the hands of the HUF. The HUF can use this capital to generate income, and thus in our opinion clubbing will not be applicable here. You can also take a second opinion from a CA or lawyer for the same.

Hi @Quicko,

Can you explain why clubbing doesn’t apply in this case and in which cases does it apply? Because in cases where clubbing applies, essentially the benefit of opening an HUF account for tax-saving purposes gets nullified?

For instance, if a member gift shares worth Rs. 10 lakhs (at cost) to the HUF and when these shares are eventually sold from the HUF for Rs. 15 lakhs, is the LTCG of Rs. 5 lakhs clubbed and taxable in the hands of the member who gifted the shares or the HUF?

Also, in the case where say Rs. 10 lakhs is transferred from members bank account to HUF bank account and those funds are used to generate capital gains income of Rs. 5 lakhs, is it taxable in the hands of the member who transferred funds to HUF or the HUF?

If this income is clubbed in the hands of the member in these cases, is there any advantage of HUF for the purpose of tax-saving in these cases?

Thank you,

Could you clarify this?

Do you mean that when it is not a gift, it is a loan and then clubbing applies on income generator?

Hey @tallerballer,

Clubbing applies when you transfer personal property to the HUF. It could be a movable property like shares or immovable property like a residential house. Any income generated from such assets would be clubbed.

So if I gift: No clubbing of income

If I transfer: Clubbing of income

I also agree with Dhruv.

Can you please please advice on this?