2 weeks ago

Routing Rent to HUF Does Not Shift Tax Liability

Can you transfer rent from personal property to your HUF? Know the tax rules · livemint.com

Putting rent into an HUF bank account does not automatically make the HUF responsible for the tax.

The important question is who owns the property that produces the rent.

If one person owns the property, that person generally remains taxable on the rental income.

This is true even if the tenant sends the money directly to the HUF.

The transfer may be treated as a gift from the Karta to the HUF.

However, the original rent still keeps its tax connection with the property owner.

If the HUF invests the money later, income from that investment may be treated differently.

Commission also belongs to the HUF only when it comes from a genuinely HUF-run business rather than a member's personal work.

Key facts

Underlying asset: The commercial property remains owned by the individual.
Taxpayer on rent: The individual owner remains taxable on the rental income.
Relevant provision: Section 96 of the Income Tax Act, 2025 addresses income transferred without transferring the asset.
HUF credit: Rent may be credited to an HUF account, but this alone does not shift the tax liability.
Gift treatment: The transferred amount is treated as a gift from the Karta to the HUF.
Section 92(2): The gift cannot be treated as HUF income because the Karta is within the specified-relative category described.
Later investments: Income subsequently earned by the HUF from investing the transferred rent may have different clubbing treatment.

livemint.com · 2 weeks ago