The following conclusions can be drawn from the provisions of clubbing and gifts according to the Income Tax Act.
An HUF can build a corpus at the time of incorporation. Any capital raised and contributed at the time of incorporation is treated as HUF’s capital and clubbing provisions shall not apply.
After the HUF is formed, the members can pool capital in the HUF and transfer capital as a gift. Gifts from members are exempt in the hands of the HUF and the HUF can use this capital to generate income, clubbing will not be applicable here.
However, if the members transfer any personal movable/immovable property to the HUF, any income generated from the property will be clubbed. Here, movable property would include shares as well.
Property includes both movable (like shares) and immovable (like real estate) property. Hence, if you gift shares to the HUF, clubbing provisions shall apply on the income generated.
However, when such income is reinvested by the HUF, the profits will not be clubbed and the HUF will be liable to pay taxes on the same.
I am a salaried person (Ccentral Govt) and opening a HUF account just for purpose of investing in shares. Members would be karta(husband), wife and 2 childrens.
1.Can i transfer any amount of money from my savings account to HUF account and if needed transfer back to Salary account anytime (irrespective of financial year ending)? Or else i need to transfer back the amount from HUF to personal savings account before Financial Year end.
2. Do i need to maintain any accounts for this purpose (i.e. transfer of amount between HUF and Savings account) ? or else if at all any income is generated then its purely from IPO market so no need to worry much about taxation bcoz at last i need to pay only LTCG and STCG for HUF account or salaried account.
3, Zerodha has a feature to gifting of shares, then can i gift shares from my personal demat account to HUF demat account and then sell shares in HUF for getting benefit of lower tax slab rate? or else overall it wont affect much at LTCG/STCG slab is fixed at 10% and 15%
4. If i transfer amount from Salary account to HUF account , whether it can be used for purchasing shares from HUF account ?
5. Is it compulsary to include children in HUF or else HUF can be formed just by Husband and Wife also?
6. If i create a HUF account with my daughters, then in future whether my personal assets can be claimed by my daughters? i.e. not the assets mentioned in HUF , but say shares held in my personal account.
7. Salaried person (Central Govt employee) can also create a HUF account without much complications?
8. Money can be transfered from wife’s or children savings account to HUF account and later transfer them back to respective accounts ?
Can you please explain what is meant by Clubbing of income? Suppose i transfer/gift shares worth 10L from personal demat to HUF demat account and profit generated by sale of sale of shares in HUF account is 3L. Then how much income will be shown in personal account and HUF account during filling of IT returns? will be shown as 1.5L in both accounts or else something?
Clubbing of income means that the income generated will be added to someone else’s income rather than the person earning it.
For HUFs, if the members transfer any personal property to the HUF, like shares in your case, the income generated i.e. the profits will be clubbed in hands of the member. This means that the ₹3L profit will be added to your income and you’ll have to pay taxes on the same.
@Quicko@nithin@Nishant_upadhayay can a huf do traing in equity and claim as business income
secondly , can a huf recieve interest free loan from memeber or any other third party without any interest payment
Reporting of delivery-based trading is based on intent. If the intent is to earn profits in the short term and the volume of transactions is also going to be high, one can report it as business income.
HUF can receive gifts from its members and the same will be exempted from taxes. For loans, it is recommended that interest at minimum rates specified by the RBI should be charged.
@Quicko
Secondly can you tell me the tax treatment if a relative transfer shares to another relative who treat this as business at inadequate consideration(off market transaction)…
I do know for the fact that every kind of gifts from anyone including relatives to a person in business is taxable under pgbp head.
Can you help me in this…Would really appreciate it.
@Quicko
can you tell me the tax treatment if a relative transfer shares to another relative who treat this as business at inadequate consideration(off market transaction)…
I do know for the fact that every kind of gifts from anyone including relatives to a person in business is taxable under pgbp head.
Can you help me in this…would really appreciate it.
(i) I have inherited residential house (build by my late father) after division among brother/ sister, which is now rented out and its rent is credited into HUF acccount (myself and my daughter only are copersoners). Can its rent be treated as purely HUF income
(ii) my wife expired last year and there are deposits/ bank balances in her name me being nominee, can I transfer that money to HUF account as myself and daughter are legal heir and inheritor of those balances. Can the interest / gains on those balances be purely treated as HUF income.
I mean in terms of Income tax , i can transfer upto what how much amount in HUF account?
If Karta transfers 10L to HUF account for IPO application , can HUF transfer it back to Karta (complete 10L) or else it has to be shown as income like gift from Karta or any other point i am missing out?
The amount will be considered a gift in the hands of HUF. However, gifts from members are exempted and hence, the HUF will have to pay no taxes on it. But, this income should be reported in the ITR.
Dear @Quicko
What will happen if HUF returns the 10L amount back to Karta? still it needs to be reported as income by the HUF or else it will be reported as loan or no need to report it during the IT returns by HUF? what kind of ITR needs to be filed for HUF account - is it ITR1 ITR2 or ITR3 if we have only capital gains income from equity.
@Quicko if Karta/ other members gifts certain shares/ MFs to HUF who in turn pledges such securities for F&O trading. Would such income from F&O trading be clubbed with income of respective member/s or taxed as income of HUF?