There are many financial transactions where, persons buying or selling immovable property — residential, agricultural, commercial or industrial property or any movable property declare their status as that of Hindu Undivided Family or HUF. But a mere declaration by a Hindu buyer or seller of real estate, or any asset, that his status is that of HUF cannot be accepted in law because there are certain legal requirements for a true declaration of HUF status. In this tip we have explained the main aspects which are to be home in mind while dealing in movable and immovable property transactions and desiring to declare the status of HUF so that a good deal of money on income tax can also be saved. |
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Tax Benefits of HUF
The question of HUF status for Hindu buyer or sellers of any property assumes importance because of certain tax advantages attached with HUF under the income tax and wealth tax laws. Thus, if an individual has personal income and has also HUF income, he would be entitled to have an exemption of ` 2,00,000 for his individual income and another ` 2,00,000 for his HUF income for the F.Y. 2012-2013 (i.e., A.Y. 2013-2014). Besides, he would also be eligible to a further income tax deduction or exemption of ` 1 lakh under Section 80C in respect of LIP premia, PPF contribution, NSC, etc., both on individual and HUF income separately. Besides, under the Wealth Tax Act, 1957 also separate exemptions are available for individual property and HUF property. Thus, whereas the taxable individual wealth is eligible to a general exemption of `30 lakh, the HUF’s taxable wealth is also eligible to a further general exemption of ` 30 lakh. Hence, persons having immovable property and jewellery and motorcars under HUF status stand to gain from the extra exemption under Wealth Tax Act as well.
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