Tax implications for reward from father’s HUF to son’s HUF

My HUF include me, my spouse, one single daughter and a son. I want to reward ₹15 Lakhs to my son’s HUF with consent to all of the members. My son’s HUF consists of himself, his spouse and two minor daughters. Will this reward be handled as revenue for my son’s HUF? Will the revenue from such reward be clubbed with the revenue of my HUF?

Answer: As per Section 56 of the Income Tax Act the items acquired usually are not taxable within the palms of the recipient so long as the combination worth of all of the items acquired by an individual through the 12 months doesn’t exceed fifty thousand rupees. Once the combination quantity crosses the brink restrict of fifty thousand rupees, complete of the worth of all of the items acquired through the 12 months develop into taxable within the palms of the recipient.

Gifts acquired from specified family usually are not handled as revenue. Members of an HUF are handled as family of the HUF for this function. So the items acquired by an HUF from any of its members just isn’t handled as revenue of the HUF. Your HUF cannot be handled as member of your son’s HUF. So the total worth of the reward given out of your HUF might be handled as revenue of your son’s HUF as the combination worth of the items acquired by your son’s HUF exceeds the brink of fifty thousand rupees. The clubbing provisions apply when the reward is acquired by an HUF from its members and as defined your HUF cannot be handled as member of your son’s HUF, the clubbing provisions won’t apply and any revenue earned on this reward shall be taxed within the palms of your son’s HUF.

Balwant Jain is a tax and funding professional and might be reached at jainbalwant@gmail.com

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