Gift from HUF to son's HUF

Dear Sir,

Yes, this amount will be taxable in the hands of your son's HUF. No, income from such gift will not be clubbed in your HUF.

Please feel free to call/revert in case of any doubts

Thanks and Regards

Abhishek Dugar

CA CS B.Com

Hi,

First, my answers are as per the facts mentioned in the question.

1. This Gift will be taxable. Any gift by HUF to any member of the HUF is not taxable. Neither your Son nor your Son's HUF is a member in your HUF

2. No. The income will not be clubbed in your HUF since it is taxable in the hands of your Son's HUF

Now, my suggestion if you really need to make this tax free. It's a bit longer process.

Gift from HUF to any member of the HUF is exempt. Also, gift from parents to Son is exempt. First gift the amount from your HUF to you or your wife. Then gift the same to your Son.

The taxability and exemption in respect of gifts from relatives applies to individuals and HUFs u/s 56(2)(vii). The word relative, in the case of a HUF, means any member of such HUF. In your case, the gift is given by your HUF and not by a member of HUF of your son. Hence, the exemption will not be covered. Accordingly, this gift will be taxable as income in your son's HUF. The definition of relative u/s 56(2)(vii) is reprodcued for your understanding:

" (e) "relative" means,—

(i) in case of an individual—

(A) spouse of the individual;

(B) brother or sister of the individual;

(C) brother or sister of the spouse of the individual;

(D) brother or sister of either of the parents of the individual;

(E) any lineal ascendant or descendant of the individual;

(F) any lineal ascendant or descendant of the spouse of the individual;

(G) spouse of the person referred to in items (B) to (F); and

(ii) in case of a Hindu undivided family, any member thereof; "

2) The clubbing of income is applicable to individuals u/s 64 of the Income Tax Act. Hence, the gift by a HUF to another HUF is not covered under the clubbing provision. Thus the income from gift by your HUF to your son's HUF will not be clubbed with the income of your HUF.

Hello Sir,

1. Yes, you can gift the money to your son's HUF.

2. No it will not be clubbed with your HUF.

Trust this clarifies your query.

Feel free to call / get back in case of further clarifications.

Thanking You.

Regards,

Rohit R Sharma

BCOM, ACA, LLB-GEN, CERT. FAFP

Dear Sir,

- Gift from your HUF to your Son's HUF shall be taxable in excess of Rs. 50,000/-

- Once you declared this as gift in your son huf ITR any income earned from it shall not be clubbed with your HUF income

1. In our view the same is taxable in Sons HUF. Please refer to the following ruling :

The amendment by Finance Act, 2012 specifically exempts the gifts received by HUF from its members [explanation (e) to Section 56(2)(vii)] and not from relatives of members. Whereas, the decision of the Hon’ble ITAT in Harshadbhai D. Vaidhya-HUF (supra), by adopting a purposive interpretation, went a step further and held that gift received by HUF from relative of Karta (or member of HUF) is also exempt within the meaning of Section 56(2)(v)/(vi)/(vii) !

Thus, the exemption in case of HUF recipients is restricted to gifts under a will [clause (c)] or in contemplation of death [clause (d)] or gift from members of HUF.

To put in other words, a statute may not be extended to meet a case for which provision has clearly and undoubtedly not been made. In the case of State of Jharkhand vs. Govind Singh [2005] 10 SCC 437 (SC) the court by referring to the rule of casus omissus observed that,

“….when the words of the statute are clear, plain or unambiguous, i.e., they are reasonably susceptible to only one meaning, the courts are bound to give effect to that meaning irrespective of consequences. The intention of the legislature is primarily to be gathered from the language used, which means that attention should be paid to what has been said as also to what has not been said.”

To summarise, while deciding the issue of taxability or otherwise in case of gifts to and from HUF, clear provisions of the Act (read as a whole) should be resorted to, before taking recourse of any judicial decisions on the subject matter, though in favour of assessee. Further, one should not miss that, though in view of the above amended position, if a member of HUF converts his/her individual property (movable/immovable) into HUF property, the HUF will not have to pay tax under Section 56(2)(vi)/(vii), but at the same time income from such property will be clubbed with the income of the Individual (donor) under Section 64(2).

2. The Income once taxed in Sons HUF will not be taxed in your HUF

Dear Sir,

If the amount received is less than 50000, you need to show it under exempt income section and if amount is higher than 50000 then the entire amount needs to be shown under other sources Head.

Please feel free to call/revert in case of any doubts

Thanks and Regards

Abhishek Dugar

CA CS B.Com