Income Tax for Hindu Undivided Family (HUF)

Will any clubbing provision apply in case of transfer of asset to Hindu Undivided Family (HUF) by its member?

Hi @Dixita

As per section 64(2)​, when an individual, being a member of HUF, transfers his property to the HUF otherwise than for adequate consideration or converts his property into the property belonging to the HUF, then it will attract the provisions of clubbing. Entire income from such property will be clubbed with the income of transferor.

I recently got married and wanted to form the HUF. Since we do not have any child.
Can we take gift as 50k of initial corpus to form a HUF? Will, this 50k have to come from the father only or any relative/friend/Mother can give this?
Also will this implies any tax implication? (I believe no)

What will happen eg. If I take 50k from a friend/Mother and fund the HUF initial corpus.
Then took another 2Lac from Mother since 2.5Lac is the tax exemption limit. (maybe 1.5Lac invested to 80c)
Will it be considered or anything related to clubbing needs to be considered?

Thanks in advance for the help.

Hi @smarty_pokemon, we recommend that you take the amount as a "gift’ into your own account and then introduce it as a capital into the HUF. You can read more about “clubbing of income” in the artcle mentioned below. Always happy to help. Let me know if you have any other query. :blush:

My profession business is intraday trading in share market .

I trade in my individual account .

Can i pay salary commission etc to my huf account ?

If this is not possible . then . I trade in my huf account . And pay salary commission etc to my individual account . Is this possible ?

@Bharti_Vasvani Can you look at this query?

Hello @HIREiN,

Intraday trading is considered as a speculative business under the income tax act. Any expense that is incurred for the business activity can be claimed as a business expense.

The onus to prove that business expenses claimed relates to the business activity is on the taxpayer.

Here is an article for more clarity:

Hope this helps!

but my query was : Can i pay salary commission etc to my huf account ? as both the person is the same !

Hello @HIREiN,

If you pay a salary to HUF then Salary paid will be an expense for the trader and income for the HUF.

Ideally, you can’t pay salary from an individual account to HUF even though both are separate legal entities since HUF has not contributed through any skills in the trading for which you pay them a salary.

Hope this helps

so , is it wise to do the vice-a-versa .
i mean , i trade in my HUF PAN account and pay salary commission to my PAN account !

it is ok ?

Can husband and wife . Both open Huf accounts separately . one . in the karta name of husband . And . 2nd . In the karta name of wife ?

for opening the HUF ;
affidavit is required on the stamp paper !
what is the amount value of the stamp paper ?
is it judicial stamp paper or non-judicial stamp paper ?
is it required to be notarized ?

Hi @HIREiN

One person cannot form HUF. It can only be formed by a family.

A husband and a wife cannot make a separate HUF as they are part of the same family. A female can be Karta, if she’s an eldest member of the family.

  1. An affidavit has to be on judicial stamp paper. The amount of stamp paper depends on the capital contribution.
  2. It is a judicial stamp paper.
  3. An affidavit can be notarized.

you said : can be !

my query is : is it required by the rule ?

My minor child .
is helping me in earning and making profit . in my sharemarket business .
So . I give her the salary/commission / fees from my profit / net earnings .

Can i deduct this payment as expenses from my earnings . From my net taxable income and save some tax thereby ?