HUF account Clubbing process

[swaroop_bingumalla]

Continuing the discussion from Ask me anything about HUF and its taxation:

@Quicko thanks for the quick video, I have small question me and my wife are both salaried income we have created a HUF account and transferred say some 15 lakhs into the HUF Demat account and earned some 2 lakhs from trading in f&o.

Now how much tax will have to be paid and does karta himself under his pan card too needs to pay some amount as part pf clubbing process

[Quicko]

Hey @swaroop_bingumalla,

These profits will be taxable to the HUF. If this is the only source of income, there will be no tax liability because the income is less than the basic exemption limit.

[swaroop_bingumalla]

So. No clubbing will Be effective right as i am in 30% bracket

[nab]

Do the HUFs without Children gets the tax benefits? Aren’t they required to be clubbed?

[nab]

@Quicko ???

[Quicko]

Hey @nab,

For HUFs, the clubbing provisions are applicable only when a member/karta transfers a personal asset to the HUF and income is being generated from that asset. Other than this, there no such condition for an HUF to have children as members.

[ramesh1985]

@Quicko Won’t be transferring 15 lakhs be treated as an Asset and getting 2 lakhs profit treated as income generated from that 15 lakhs asset?

If No, then what is treated as “member/karta transfers a personal asset to the HUF”?

Kindly clarify

[tallerballer]

You have to gift the 15 lakhs. If you transfer it with expectation to get it back then clubbing will apply.

[ramesh1985]

Won’t gifting this huge amount attract tax at HUF level ?

[tallerballer]

Gift from members of HUF to HUF is tax free for HUF.

Ask me anything about HUF and its taxation

Hey @tallerballer, @anilsaxena @paekut, Addressing all the queries related to clubbing: 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. Gift…

[Quicko]

Hi Ramesh, you can refer to this.

Ask me anything about HUF and its taxation

Hey @tallerballer, @anilsaxena @paekut, Addressing all the queries related to clubbing: 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. Gift…

The opinions on this matter may differ. You can take a second opinion of needed.

[ayush_agarwal3]

If I have some mutual funds holdings which I had transferred it from individual account to HUF demat account. Further I sold the mutual funds… where will the LTCG taxable ultimately?

[Quicko]

Hello @ayush_agarwal3 ,

It looks like you sold the mutual fund from your HUF’s demat account, so the tax liability will also be of the HUF.

If a member transfers an asset to the HUF, it is treated as a gift and is exempt under Section 56 of the Income Tax Act. However, you must still disclose it as exempt income in the HUF’s ITR.

Additionally, any capital gains earned from selling these shares will also be taxable in the HUF’s ITR.