CREATING HUF

POSTED BY Finance Student ON April 30, 2013 1:10 pm COMMENTS (10)

Hi,

Just read the article regarding HUF creation. I want your help to understand this clearly.

1. If Me and My wife created HUF under my name and put my income ,which is above the tax slab, in HUF account then do I need to pay TAX on that or we can show that as HUF income and give TAX as per HUF TAX slab??

2. May I open PPF account for HUF account?

10 replies on this article “CREATING HUF”

  1. Dear Finance Student, I’m trying to answer your queries.

    1. U said, the money put by me in My own HUF cant reduce my Tax liability. I understand. Money generated from that money also would become my TAX liability. I Understand.
    In This FY, I put my Money in My HUF and in next or next-TO-next FY if that money generates interest then is that would become my TAX liability of HUF liability??
    no matter income is generated imemdiately or after a delay from the gifted amount. the fact remains same that it was your money & thus your name ‘ll be there to pay tax.

    Becoz suppose there are 5 members in my HUF and if HUF dissolves then this money would get divided to 5 members. Am I right? Means I will pay the TAX but I would not get back the money if HUF dissolves. Yes, by transferring your own money & then dissolving the HUF, you ‘ll only get the share from the HUF not the full money.

    FYI : Knowledge Required. No Family emotions involved here. BY reading the Articles I understood Going into HUF is easy but then HUF account would get monitored by HUF rules, not by himself.
    Very True. HUF rules ‘ll decide the fate of your money, once it’s part of HUF. Yes taxation of that money or of the income generated from that money is a different question. Also this knowledge required thing is to force you to learn more.

    2. May I be a part of my Father’s HUF as well my own HUF?
    You can not run, 2 HUFs parallel as the concept of partial partition has ben abolished long back. till the time, you are not operating your own HUF, you are part of your father’s HUF. Once your own HUF is running, you w’d have to part your share from father’s HUF.

    Thanks

    Ashal

  2. Finance Student says:

    Thanx Ashal. 🙂

    Really I need a lot of reading……

    Just a ques raised in my mind…trying to put that in words….

    1. U said, the money put by me in My own HUF cant reduce my Tax liability. I understand. Money generated from that money also would become my TAX liability. I Understand.

    In This FY, I put my Money in My HUF and in next or next-TO-next FY if that money generates interest then is that would become my TAX liability of HUF liability??

    Becoz suppose there are 5 members in my HUF and if HUF dissolves then this money would get divided to 5 members. Am I right? Means I will pay the TAX but I would not get back the money if HUF dissolves.

    FYI : Knowledge Required. No Family emotions involved here. BY reading the Articles I understood Going into HUF is easy but then HUF account would get monitored by HUF rules, not by himself.

    2. May I be a part of my Father’s HUF as well my own HUF?

  3. Dear Finance Student, I’m discussing general Eq. MFs & you are talking about tax saver MFs with 3Y lock in period. It seems, a lot of reading is need to be done by you. Please read & cross question again.

    HUF creation has nothing to do with your job or your wife’s job. Still if you want to get some juice out of your HUF planning, my take – Please consult a CA or a Tax professional. Pay him/her fee as demanded & get clarified each & everything.

    Thanks

    Ashal

  4. Finance Student says:

    Alright, I understand. THANXX……

    It means I cant reduce my TAX liability but by putting the sum into HUF I can save the money, as interest, generated from that SUM as well I can use that as my personal purpose. Ofcourse when the money is not locked in EQ MF or any other ways.

    Which EQ MF you suggest? Those kind of MFs normally have 3YRs of LOCK-IN period. Am I right?

    Let me know what if I am the only earning person in the HUF. Is that possible scenario while I create the HUF account?

  5. Dear Finance Student, I’m unable to understand, what do you want to do with HUF. If your idea is to reduce your own tax liability on your income, I already told, that’s not possible. Please do tell me, what’s your thinking & what do you want to do?

    Regarding the 1L Rs. you are referring to, same can be put in by you in HUF but on part of HUF, please make sure the income which is to be generated, should be a tax free. Like investing for more than 1Y in Eq. MFs.

    Thanks

    Ashal

  6. Finance Student says:

    Hi Ashal,

    U know I have gone through that link. After reading that only got these infos regarding HUF. You please let me know if there is any way so I can create a loop and put 1L around in my HUF. As I understand by direct paying by myself to my HUF, my own TAX liability would not get reduced. Please let me know if there is any other ways??

    Let me know what if I am the only earning person in the HUF. Is that possible scenario while I create the HUF account?

  7. Dear Finance Student, please check this –

    https://www.jagoinvestor.com/2011/10/huf-creation-and-saving-tax.html

    Please do read the comments also.

    Thanks

    Ashal

  8. Dear Finance Student, the loop gifting – you to your FIL & back to you ‘ll not serve any purpose. If yes, please elaborate how are you planning it?

    No your Mom is not the member of your HUF, hence your HUF can not invest in her PPF.

    Thanks

    Ashal

  9. Finance Student says:

    Thank You Ashal.

    My Father-in-Law is retired and he gets very small pension amount around 4-5K. In that case, May I gift him 1L and get back that 1L as gift from him to my HUF? Then as per the Jagoinvestor article, I gone through, I would not club with my income. Please let me know if there is any point I am missing.

    I can pay upto 1L to my PPF as well my HUF can pay to my Mom’s PPF upto 1L….Am I right??

  10. Dear Finance student, I’m trying to answer your query.

    1. Yes you can gift your income, money, capital to your own HUF but you can not bring down your own tax liability. There is more to it, the gifted amount to HUF if generate any taxable income, this income ‘ll become taxable in your name as it ‘ll be clubbed with your own income.

    For example you are earning 14L Rs. Now as per your query, you want to gift 5L Rs. to your HUF, your basic taxable income still remains 14L Rs. Now interestingly, if the HUF invest these 5L Rs. into bank FD & earns say 50000 Rs. interest, your income ‘ll become 14.5L Rs.

    2. No, HUF can not open a new PPF account but the HUF can invest it’s money into PPF account of either you or your wife.

    Thanks

    Ashal

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