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What are the possible ways of planning my tax payments using the Hindu Undivided family (HUF) status?

I am a married Hindu having only one daughter. What are the possible ways of planning my tax payments using the Hindu Undivided family (HUF) status? If I/my wife gift a sum to my HUF can the income accrued over the same be assessed under the HUFstatus? Is more than one male member required to form a HUF? As me and my wife together earn around Rs 1.5 lakhs we are looking forward to your advice.
BKA

Corpus in a Hindu Undivided Family (HUF) entity normally comes in the form of ancestral property or on partition of an HUF (thereby the common property being distributed among the Co-parceners). A HUF cannot be formed by gifting a sum to a HUF. This would attract the clubbing provisions contained in section 64 (2) of the Income Tax Act, 1961 and the income arising therefrom would be taxed in the hands of the individual. However, in an existing HUF, a Co-parcener can throw his individual property into the common stock of the HUF.

For an HUF, at least one male member is required.

On the matter of tax planning using HUF, based on the information given by you the following methods have been suggested. The exercise of tax planning can be complete only if full information about your case is made available.

• If a trust is created by a male member to settle his separate property thereon for the benefits of his HUF, with a stipulation that income shall accrue for a specified period and the corpus going to the trust afterwards, provisions of Section 64 are not attracted.

Where an assessee withdraws funds lying in his capital account of the firm where he is a partner and the same is advanced to an HUF which is repaid by the HUF after a specified period of time, the said loan will not attract the clubbing provisions contained in Section 64 and the income arising from such advance will be assessable in the hands of the HUF.

I am a doctor who pays tax at 33 per cent. I normally have about Rs.10,000 per month to invest. I have asked several tax experts and could not get a satisfactory answer. Please sugest good ways of investing this amount with fair degree of safety - I don't need liquidity.
Dr.Srinivas

Since the question relates to investment and not to tax, we cannot answer this question.

Could you let me know if an exporter sells his DEPB license would the amount received from the sale of DEPB be part of his taxable income?
Kurush Jungalwala

Consideration received on sale of DEPB licence is part of business income and hence taxable. However, export profit qualifies for deduction from gross total income under section 80HHC of the Income Tax Act, 1961. The procedure for computation of profits of the business (including profits arising from the sale of DEPB licence) is given in Explanation to Section 80HHC of the Act.

What are the tax saving schemes so that the tax burden can be reduced. Can we gift the money to a dependent?
N.S.Narayana Rao

The Income Tax Act, 1961 contains various provisions for reducing one's Income Tax liability. For any one or more of these provisions to be discussed, it is imperative to have information relating to status of the assessee under the Act, sources of income, residential status, age (in case of individuals) etc.

Gifting of money to a dependent will not reduce one's tax liability.

Could you please give details of the exemption limit enhancement to Rs 75,000 with regard to house property introduced in the last budget? Is there some time limit involved for completion of the property? I am in the top tax bracket and in a position to fund the property without a loan. Does taking a minimum amount of loan provide any benefit through through tax reduction vis-à-vis the interest outgo?
Sudhir Hastak

The Finance Act, 1999 has amended Section 24 (2) of the Income Tax Act, 1961 thereby raising the amount of deduction in respect of interest paid on capital borrowed for acquisition/ construction of house property. As a result of the amendment, where the property is acquired or constructed with capital borrowed on or after April 1, 1999 and such acquisition or construction is completed before April 1, 2001, the deduction on account of interest will be Rs.75,000 instead of Rs.30,000.

Assuming that you are going to buy the property for your own use, you are eligible for the deduction of Rs.75,000 under the Head "Income from House property". Since the property would be self-occupied, the annual value of the property computed in accordance with provisions of the Act would be nil thereby resulting in a loss under this head. This loss can be set off against your income under any other head.

The amount of annual outflow on account of interest is a derivative of factors such as the amount of loan availed the rate of interest, the tenure of the loan, and the schedule of repayment. However, by financing the property out of own resources, you would be losing the tax shelter on account of the deduction available to the extent of Rs.75,000 and the consequent tax on the amount at 33 per cent. Further, you are also eligible for a rebate of 20 per cent under section 88 of the I.T. Act. This rebate is available on the principal amount repaid to an approved housing finance institution from whom money has been borrowed for purchase or construction of house property, subject to a maximum amount of Rs.10,000.

I am interested in finding what is the tax implication of a cash gift of Rs. x given by someone and a gift given in kind like a car. If the gift is given in the form of money then it is clubbed within the income of the recipient but what if the gift is in kind? What is the tax to be paid for each case?
Rajeev Agarwal

Gift given is not chargeable to any tax as Gift Tax Act has been abolished with effect from October 1, 1998 and there is no Income Tax chargeable on the recipient of the gift. Gift given in kind also does not attract any tax.

Does an NRI have to pay tax in India?
Did you miss the Sept 30 tax deadline?

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