Can karta/members gift their personal income to HUF, if yes to what extent?

[Yogesh Goyal]

Can karta/members gift their personal income to HUF, if yes to what extent?

[Yogesh Goyal]

HUF

[Dr. Ashok Dhamija]

Yes. The Karta and members of a Hindu Undivided Family (HUF) can gift their personal income to the HUF. And, there is no limit on the amount of such gift. Moreover, there is no tax applicable on such gift.

The amount so transferred by way of gift can be in the form of cash, jewellery or any movable property or also in the form of any immovable property. There is no tax on such gift if the gift is given to the HUF by the Karta or any member of the HUF.

The relevant provision is contained in Section 56(2)(vii) of the Income Tax Act, 1961, the relevant part of which is reproduced below:

“(2) In particular and without prejudice to the generality of the provisions of sub-section (1), the following incomes shall be chargeable to income tax under the head “Income from other sources”, namely:—

(vii) where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009,—

(a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum;

(b) any immovable property,—

(i) without consideration, the stamp duty value of which exceeds fifty thousand rupees, the stamp duty value of such property;

(ii) for a consideration which is less than the stamp duty value of the property by an amount exceeding fifty thousand rupees, the stamp duty value of such property as exceeds such consideration:

Provided that where the date of the agreement fixing the amount of consideration for the transfer of immovable property and the date of registration are not the same, the stamp duty value on the date of the agreement may be taken for the purposes of this sub-clause:

Provided further that the said proviso shall apply only in a case where the amount of consideration referred to therein, or a part thereof, has been paid by any mode other than cash on or before the date of the agreement for the transfer of such immovable property;

(c) any property, other than immovable property,—

(i) without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property;

(ii) for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration:

Provided that where the stamp duty value of immovable property as referred to in sub-clause (b) is disputed by the assessee on grounds mentioned in sub-section (2) of Section 50-C, the Assessing Officer may refer the valuation of such property to a Valuation Officer, and the provisions of Section 50-C and sub-section (15) of Section 155 shall, as far as may be, apply in relation to the stamp duty value of such property for the purpose of sub-clause (b) as they apply for valuation of capital asset under those sections:

Provided further that this clause shall not apply to any sum of money or any property received—

(a) from any relative; or

(b) on the occasion of the marriage of the individual; or

(c) under a will or by way of inheritance; or

(d) in contemplation of death of the payer or donor, as the case may be; or

(e) from any local authority as defined in the Explanation to clause (20) of Section 10; or

(f) from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23-C) of Section 10; or

(g) from any trust or institution registered under Section 12-AA.

Explanation.—For the purposes of this clause,—

(a) “assessable” shall have the meaning assigned to it in the Explanation 2 to sub-section (2) of Section 50-C;

(b) “fair market value” of a property, other than an immovable property, means the value determined in accordance with the method as may be prescribed;

(c) “jewellery” shall have the meaning assigned to it in the Explanation to sub-clause (ii) of clause (14) of Section 2;

(d) “property” means the following capital asset of the assessee, namely—

(i) immovable property being land or building or both;

(ii) shares and securities;

(iii) jewellery;

(iv) archaeological collections;

(v) drawings;

(vi) paintings;

(vii) sculptures;

(viii) any work of art; or

(ix) bullion;

(e) “relative” means,—

(i) in case of an individual—

(A) spouse of the individual;

(B) brother or sister of the individual;

(C) brother or sister of the spouse of the individual;

(D) brother or sister of either of the parents of the individual;

(E) any lineal ascendant or descendant of the individual;

(F) any lineal ascendant or descendant of the spouse of the individual;

(G) spouse of the person referred to in items (B) to (F); and

(ii) in case of a Hindu Undivided Family, any member thereof;

(f) “stamp duty value” means the value adopted or assessed or assessable by any authority of the Central Government or a State Government for the purpose of payment of stamp duty in respect of an immovable property;”

      

---

Dr. Ashok Dhamija is a New Delhi based Supreme Court Advocate and author of law books. Read more about him by clicking here. List of his Forum Replies. List of his other articles. List of his Quora Answers. List of his YouTube Videos.

[Author]

Posts