Creation of HUF and its validity for taxation

I will try to answer all your questions.

1 For an income to be taxed as an income of HUF there needs to be 2 coparcener but since you have a daughter and after some amendments she will be considered your coparcener and you can create an HUF.

2 I don't think you should provide such professional services via HUF because in case where personal expertise is required in many cases such income has been taxed in the hands of individual rather than HUF.

3 your sister would be included in your father's HUF even if she is married.

4 If they are ancestral property they can be easily transferred to HUF but if you are going to transfer the property purchased by yourself to HUF without consideration then rental income earned by such HUF would be taxed in your hand, however if you transfer it for proper consideration it would be taxed in hands of HUF.

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you

Yes you can show such tuition receipt as income from other sources and for professional services you can show it under 44ADA, if it's allowed being a government employee.

Since you are Jaipur as well if you need any assistance do let me know.

Hi,

- In your case there will be no use for you to create HUF if HUF will receive the professional income and Income from rental property as mentioned by you. The main reason is, it is not an income earned by HUF as the services will be provided by you and your wife in the personal capacity. It will be your individual income and will be taxable in your hands  respectively. If the income is directly related to any investment of funds by the HUF then it would be taxable in the hands of HUF.

- Conversion of self acquired property into HUF property is taxable u/s 64(2). Section 64(2) deals with the clubbing of income so rental income derived by the HUF will be clubbed in your hands and taxable accordingly.

- Show income from tution u/s 44AD and pay tax on 8% of 5 lacs each.

- In respect to professional income, show income u/s 44ADA and pay tax on 50% of the gross receipts.

Thanks

Hi,

You can be part of only one HUF. The moment you create on your own huf with your wife and son, you will not be part of your father's HUF.

However, a married girl can be part of two HUFs (with husband and with father).

Further, a HUF cannot have salary income. Salary income will always be in the name of members.

Huf can earn rental income

Hello,

Even if you create a HUF, professional income, and the rental income would be taxable in your individuals' name only. And also a HUF cannot have salary income. Since professional income would depend upon your personal skills & abilities and the rental income would be charged in individuals hands as per sec. 64(2).

Yes, you can show your tuition income as income from other sources.

I hope this answer satisfies your requirement.

Regards,

CA Hunny Badlani

Dear Sir,

Hope you are doing well !!

-You can not be part of two HUF.

-Any remuneration or fee received by a member of the HUF as a director or a partner of a company or firm as a result of an investment made in such concern from the funds of the HUF shall be treated as income of the same. However, if a member earns such an amount as a director or a partner for the services rendered purely in a personal capacity due to own aptitude to the business of the concern, it shall be treated as the income of the individual and not the HUF. It is stated that the remuneration and commissions received by the Karta of HUF on account of his qualifications and exertions and not on account of investments of the family funds in the company cannot be treated as an income of HUF.

-Under the Income-tax Act , the income arising from such converted property will be deemed to be income of the transferor individual (Clubbing Provision-64(2)). Moreover, on partition of such property, in case such property is distributed to wife of such individual, the income arising therefrom shall be continued to be taxable in the hands of the transferor individual.

Either you can show tuition income as Income from other sources or business income u/s 44ad.

Hello Sir,

1. You can be part of only one HUF.

2.As stated in Section 64(2), income from the transfer of a self-acquired asset, without adequate consideration or conversion of the same into a joint family property, shall not be treated as the income of the HUF. It shall continue to be taxed under the transferor who is a member of the HUF.

3.Any remuneration is given to the HUF to the Karta or any other member of the family for services rendered by the individual in conducting the family’s business, the remuneration is deductible if the payment is:

• paid under a bona fide and valid agreement;
• in the interest of an expedient for the business of family; and
• reasonable and not excessive.

However, in your case,on account of personal qualification/ exertions and not on account of investment of family funds in the company and therefore, could not be treated as an income of the HUF.