Section 64 of Income-tax

Let us look at section 64 of income tax which is in reference to clubbing of income tax.

When a wife receives a gift that earns income it reflects on the husband income. The gift is clubbed with his income for the year and he has to pay tax accordingly. Hence, it is clear that a married woman should not receive any gift as property from her husband, father-in-law or mother-in-law.

A house is purchased in the name of the spouse but if she hasn’t made any contribution monetarily to the purchase, the rental income would be treated as income.  This is subject to tax at the applicable rate. To avoid the conditions in Section 64, you can give your wife a loan at a reasonable interest rate if you wish to invest in her name. A married woman cannot receive a gift from her husband, in-laws or other relatives, but she can get a loan. This will ensure that you don’t have to go through any hassles of buying a home in your spouse’s name

Bank loan in the name of your wife

Availing a bank loan to purchase a property in the name of your spouse (wife) has its tax benefits.
There are many benefits to investing in the name and credit of women, including.
1. Many states have lower stamp duties for properties that women purchase. Rajasthan, for example, charges 1 % less stamp tax on property bought by women than it does on investments made by men.
2. A woman who purchases a home and takes out a loan to pay it off may be eligible for Section 80C or 24 of Income-tax.
3. Additional tax exemption may be available for purchasing a property under the name of a lady and renting it out.
4. Women may get a lower interest rate from some banks.
It can help women increase their self-esteem and sense of security

Real Estate and HINDU UNDIVIDED FAMILY

Everyone wants to save taxes. This is possible only by using the Various provisions of the Income Tax Laws. There is a distinction between tax evasion, which involves using illegal activities like money laundering or black money, and tax savings by following certain legal procedures.

A prudent investor can avoid income tax by using a legally recognized method, forming a separate tax entity officially recognized under the Income-Tax Law as HUF (Hindu Undivided Family).

Although we cannot create HUF, we can arrange capital. Initial HUF is an empty balloon, which no one has yet filled with air. Only when filled with air does a balloon expands.  A HUF without funds is the same. To form a HUF a marriage is essential.

Step by Step Formation of a HUF

 The formation and operation of a HUF require a deed. A deed is executed from both a tax and legal perspective. It includes the information of the Karta and members of HUF (coparceners), details of other family members, and the nature of the business of HUF. Coparceners refers to a joint heir, a person who has legal right over the ancestral property by birth.

Members: After marriage, a HUF is automatically constituted. Let’s say your father is a HUF Karta, and you are a coparcener. After your marriage, you can create a new HUF by dividing an existing HUF into multiple units. The HUF is named appropriately according to its founder. 

PAN: As a Karta of the HUF, you should apply for a separate PAN. You will need to quote this PAN when making investments, carrying out business activities, or purchasing property in the name HUF.

Bank Account: You should first open a bank account in the name of the HUF after obtaining a PAN Card. This will allow you to make transactions using cheques and deposit any income you earn in your bank account.

Formation of Capital of a HUF

The capital or corpus of the HUF is an essential requirement for its constitution. This capital is distinct from any assets its members own. Your father/mother/in-laws may gift money to your newly-created HUF, clearly specifying in the Gift Deed that the gift is to your HUF and not to yourself. The corpus is created from property that is transferred to the HUF by way of a Will. Transfer money to HUF capital by gifting it, keeping in mind the clubbing provisions and tax on gifts under the income tax act.

You should not give anything to your HUF, as it will cause you to lose the benefit of HUF formation. Gifts given by friends and family, cannot be more than 50000 (Section 56). You can also receive gifts from larger HUF members, who may be your relatives, but not as your HUF’s.

Once the HUF has established a core of its members and can get going, it is important to ensure that the HUF’s affairs are separate from those of the individual members. Your HUF should have a bank account. As done in the past, members of the HUF continue to run their businesses

Can a Daughter Be a Coparcener in a HUF?

Yes

A daughter is a coparcener/joint-heir according to the amendment of The Hindu Succession Act 1956, 9 September 2005.  Like her brother, she can enforce the division of the family property and claim her share.

Even after her marriage, she continues to serve as the coparcener for her father’s HUF. The law states that female members be part of the HUF  even after marriage. A girl is a part of the Hindu Undivided Family even after marrying.

Coparcener: One who can demand that the family property be divided and given their share (or any assets of the HUF) to the HUF in case they decide to separate from the HUF.

Is it possible for an unmarried man to create a HUF?

He cannot! If you are referring to a HUF, he cannot. While he could be a member of a HUF of grandfather or father, he must wait until his marriage to form his HUF. After his birth, every Hindu becomes a member of a HUF.

Can a Female Be the Karta?

Yes, she can. If her father dies, an unmarried daughter will be the Karta for the HUF. This is especially applicable if she does not have a brother.

Can there be an all-female HUF

Yes. If a couple has only one child and the husband is not around anymore, both the mother and the daughter can continue the HUF.

Is it possible for HUF to become a partner in any business?

No! It cannot enter into a partnership agreement with any other undivided family member or individual.

Does a HUF allow to pay remuneration to its Karta?

Yes,  a Karta can be paid remuneration under a valid agreement that is bonafide.   The payment must be genuine and in the best interest of the family business. The remuneration is for expenditure and is permissible.

If HUF invests in real estate, it will receive a tax benefit. 

A businessman or a self-employed person can form a HUF to avail benefits. You can create a HUF and then invest in real estate, residential or commercial. HUFs are exempt from certain taxes and can avail tax exemptions on housing loans. The Hindu Undivided Family can also enjoy tax benefits on rental property.