Income tax on preliminary present to HUF

My CA says that for preliminary contribution to my newly fashioned HUF I can take any sum of cash from my father as a present and likewise claims that there’s completely no tax legal responsibility on such present transaction for the primary time. Subsequent items acquired can be taxed as per his opinion. I perceive that that is flawed and I’ve  to pay tax if a complete revenue of the HUF together with such items exceeds 2.5 lakhs. Please enlighten me whether or not my CA or me is true.

Answer: After abolition of Gift Tax Act the place the donor was required to pay tax on the quantity of items made throughout the yr, the federal government afterward launched a provision within the Income Tax Act below which the recipient of present is required to pay tax on the items acquired by him if the mixture of the items acquired by him throughout the yr exceeded the brink of fifty thousand rupees. However, items acquired from sure specified family are outdoors the scope of this provision treating items as revenue of the person recipient. 

As far items acquired by an HUF is anxious its members are to be handled as its relative and thus items acquired by the HUF from its members is to not be taxed in its arms with none threshold restrict. Though it isn’t to be taxed within the arms of the HUF however the revenue arising from the asset gifted is required to be clubbed with the revenue of the individual making the present. The karta, his partner and all of the family members whether or not son, daughter, daughter in legislation and youngsters and their wives as much as 4th era are handled as its members of the HUF. Father of the Karta is to not be handled as relative of the HUF so any present acquired out of your father by your HUF might be handled as revenue within the arms of your HUF if mixture of the items acquired by your HUF exceeded fifty thousand in a yr. The revenue tax legislation doesn’t differentiate between the preliminary present to the HUF and subsequent items and subsequently all of the items acquired out of your father can be subjected to tax in case mixture worth of items exceed the brink of fifty thousand rupees in a yr. So your CA is flawed and your understanding of the legislation is appropriate.

Balwant Jain is a tax and funding professional and could be reached on jainbalwant@gmail.com and @jainbalwant on twitter.

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