Archive · 18 Sep 2026
Routing Rent to HUF Does Not Shift Tax Liability
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.
Rent from a property personally owned by an individual remains taxable to that individual, even if deposited into an HUF account.
Under Section 96 of the Income Tax Act, 2025, transferring income without transferring the underlying asset does not change its tax treatment.
The amount credited to the HUF may be treated as a gift from the Karta, but Section 92(2) prevents it from becoming HUF income in this situation.
Income earned by the HUF from later investments of the transferred rent may receive different tax treatment from the original rental income.
Commission is HUF income only when earned through a genuine HUF-owned business, not primarily through the personal efforts or skills of a member.
- Who
- The individual property owner, the HUF, and its Karta are involved.
- What
- The article explains whether rent from an individually owned property can be credited to an HUF and taxed there.
- When
- The article refers to Section 96 of the Income Tax Act, 2025, effective from 1 April 2026.
- Where
- The issue concerns tax treatment of rent credited to an HUF account.
- Why
- Tax liability depends on ownership of the underlying property and entitlement to the income, not merely on the bank account receiving the payment.
- 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.