POSTED BY September 21, 2013 8:33 pm COMMENTS (6)ON
Hi, a brief profile before I ask the question. I am a salaried professional with wife (salaried) and retired parents with income from rent and investments (above no tax limit). Based on your articles on HUF, I have devised the following calculations to better my tax planning.
Current HRA: Rs. 4,00,000 p.a.
HRA claimed so far: Rs. 16,500 p.m. or Rs. 198,000
Taxable HRA: Rs. 4,00,000 – Rs. 198,000 = Rs. 2,02,000
Taxable Slab @ 30%, so tax = 30% of Rs. 2,02,000 = Rs. 60,600
Hypothetically, if my father starts a HUF with me as a coparcener, I can shift to his house and pay him a higher rent of Rs. 33000 p.m. in the name of the HUF for which he is the karta.
My tax advantage is Rs. 60,600
Now for ITR of the HUF
Total Annual Income: Rs. 4,00,000
Total tax @10% = 10% of (4,00,00-1,80,000) = 10% of 2,20,000 = Rs. 22000
So Net payout within the family is Rs. 60,000 – Rs. 22,000 = Rs. 38,000
Question: What are the possible challenges with this arrangement?
Question: What are the requirements to execute this arrangement?