Gift from HUF to its members ? Taxes ? Status ? Legal position ?
Gifts permitted by HUF to its members satisfying to the conditions of Section 10(2) are exempt from Income Tax in the hands of recipients. It shall be taxable only if the value of the gift is above the threshold limit provided in the Section 56(2)(vii).
link : https://cs-india.com/gifts-to-and-from-huf/#:~:text=Gifts%20to%20Members%20from%20HUF,56(2)(vii).
Gift from any relative :
Gift received from Relatives is fully exempted from the levy of tax and no income tax would be levied on such Gifts.
To remove any confusion regarding the classification of Relatives, the Income Tax Act has very clearly laid down that in case of individual, only the following will be treated as relative for the purpose of claiming exemption:
Spouse of the Individual
Brother or Sister of the Individual
Brother or Sister of spouse of the Individual
Brother or Sister of either of the parents of the Individual
Any Linear ascendant or descendent of the Individual
Any Linear ascendant or descendent of the spouse of the Individual
Spouse of the person mentioned above [w.e.f. 01.04.2021]
In case of HUF, all members would be considered its relative.
But as per Section 64(2), the income earn from this gifted property will be considered as income of Donor. This is known as clubbing of income. HUF give gift to its member is exempt?
In this matter there are various judgments as under: Veenitkumar Raghavjibhai Bhalodia Vs. I.T.O.5(4) Rajkot ITA No 583 and 601/Rjt/2008 Asst.Yr. 2005-06 Ahd. Tribunal. Dated 17/05/2011
Brief fact is as under: The assessee has accepted gift from Raghavjibhai Bhanjibhai Patel (Bhalodia) HUF. The A.O. was of the view that HUF is not covered in the definition of “ relative “ therefore HUF was held to be taxed. The CIT(A) confirmed the view of A.O.
Tribunal has observed that, though for taxation purpose, an HUF is considered as a single unit, rather an HUF is a “group of relatives” as it is formed by the relatives. Therefore in considered view, the ‘ relative’ explained in Explanation to section 56(2)(vi) of the Act includes “relatives” and the assessee has received gift from his HUF which is “a group of relatives”, the gift received by the assessee from the HUF should be interpreted to mean that gift was received from the ‘relatives” therefore the same is not taxable under section 56(2)(vi) of the Act.
Gyanchand M. Bardia Vs. The Income Tax Officer (ITAT Ahmedabad) Appeal No 1072/Ahd/2016 Asst.Yr. 2012-13 Dated 21/02/2018 In this case the fact was same as in the case of Rajkot Tribunal, but the observations of members are different.
Their observation was, As per the provisions of the Act, gift from HUF to any member of the HUF is not exempt from taxable income. It is other way that the gift from member to the HUF is exempt from tax. The appellant contended that it is implied when gift from member to HUF is exempt from tax, same way gift from HUF to member is also tax free.
But the appellant forgets the difference that the Karta of the HUF manages the affairs of the HUF as trustee of the HUF on behalf of other members. When the Honorable Parliament brought amendment to the statute declaring gift from member to HUF is tax free, but it was not considered proper to make gift from HUF to member as tax free. Both the cases are pending at high Court, wait and watch.
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Income tax implication of gift given by a member to own HUF
I am Karta of my HUF. In FY 2020 – 2021 I have invested my personal tax paid amount in my HUF account, which is generating interest income. What are the tax implications for me as well as for my HUF?- Anand Shah
The investment of individual member’s money in the name of HUF is generally treated as gift made unless the member intended it to be a loan.
Since this transaction only took place last year, you have the options to treat it either way in case income tax return for you and your HUF are pending.
