Can trustee even be a beneficiary whereas organising a belief in India?

A Mint article, ‘Should I write a will or form a trust to distribute my assets?’, talked about organising a belief with a daughter as trustee and including yet one more individual as trustee and beneficiary. As far as I do know, a trustee can’t be the beneficiary. Please verify if that is appropriate.

—Dinesh Haria

When utilizing a personal belief in India, it isn’t uncommon for the trustee to even be a beneficiary of such belief. There isn’t any embargo below the Indian Trusts Act, 1882, which prohibits a person to be a trustee in addition to beneficiary. In sensible phrases, for many households which arrange trusts for his or her household enterprise and private property, it is a widespread strategy.

That stated, from a tax perspective, if the identical particular person acts in all three capacities – settlor, beneficiary in addition to the trustee of a personal belief, such belief could also be handled as a “revocable belief” and thereby doesn’t obtain any tax or asset safety. This ought to positively be prevented.

Who can donate to an Hindu Undivided Family (HUF), and what’s the tax implication on varied donations paid or obtained in an HUF account?

—Dr. Ajay Garg

A HUF contains all individuals forming a part of one lineal household department and having a typical ancestor. All family members together with a partner / spouse are considered ‘members’ of the HUF and have totally different authorized rights within the HUF

Any individual together with a person (being father, mom, sons, daughters-in-law, daughters, and so on.) can contribute / reward monies to an HUF.

Under the Income Tax Act, 1961, any funds obtained by a taxpayer (together with an HUF) as a present with out consideration is chargeable to tax within the fingers of such taxpayer, if the mixture worth of such reward obtained in a single FY exceeds ₹50,000.

However, reward obtained by an HUF from its members is particularly exempt from such taxation. Thus, there shouldn’t be any tax legal responsibility within the occasion a member of an HUF presents cash to the HUF.

Note, if a member of an HUF, presents cash to the HUF, any earnings arising from it must be clubbed with the earnings of such member.

Rishabh Shroff, is accomplice & co-head Privant Client at Cyril Amarchand Mangaldas.

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