HUF: Easy to Make, Difficult to Break

HUF: Easy to Make, Difficult to Break

Hindu law recognizes the concept family unit & the practice of pooling together the efforts, skills & resources of the family members for the benefit of all the members in the family. It is recognized as a separate tax entity u/s 2(31) of the Income-tax Act, 1961. There are a lot of confusions & ambiguities amongst readers with regard to HUF & its taxation. Here is a compilation of the few common issues over HUF:
Can HUF receive gift from non members?
There is no restriction on receiving the gift by HUF from any person who is not a member of HUF. However, it may be noted that any gift received by HUF from any person will be taxable if the aggregate value exceeds Rs. 50,000/-. Exception is provided if the gift is received (a) from the Relatives or (b) Under a will or by way of inheritance or © in contemplation of death of the payer. The meaning of “Relatives” in case of HUF has been restricted to “any member of the family” only. So, if the gift is received by HUF from anyone other than a member then it shall be treated as “Income” if the aggregate amount exceeds Rs. 50,000/-. In short, a gift from any person who may be the “Relative of the Member” is not considered as the “Relative of the HUF”.
2.Whether a member can divert the income to the HUF by gifting the amount to HUF or by throwing his individual property in the common Hotchpotch?
Yes, the amount can be gifted or thrown in the common hotchpotch by the member.

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