HUF (Hindu Undivided Family) PAN & TAX Doubts

[sunit123]

I tried to google but cannot find a good guide to explain pro and cons for HUF, also the limitations for members and other such information. Would be good if someone can share such similar document.

Leave aside tax benefit which is not much...There are lot of cons of HUF which outweighs Pros....Most of the CA's only have theoretical gyaan....Practical shortcomings can be shared only by the victim 😥

I will share a detailed post on my experience with HUF.

 

[sunit123]

If any member transfers any assets as a gift then the income generated would be taxed to HUF.
Yeah if you intend to transfer the asset to get it back after time period then clubbing provisions would apply.
Am i right? @its_karan

Firstly transferring an asset out of HUF is an impossible task...HUF is like a BLACK HOLE. Secondly, if somehow you managed to take out asset from HUF then you will be penalized heavily.

 

[sunit123]

However, what happens if the flat is in the name of only the husband?

Once a flat is transferred to HUF then it will become panchayati property

 

[avikrish]

Firstly transferring an asset out of HUF is an impossible task...HUF is like a BLACK HOLE. Secondly, if somehow you managed to take out asset from HUF then you will be penalized heavily.

Duede , completely agree on asset transfer to and from huf is a black hole and no one does or recommends it.

Business is a virtual entity where the building/asset is a rented to karta or owned by karta in general or owned by any huf member

And then they do business on huf pan


Always money should be generated in huf account and members should take money from huf , that is the best way

Money from individuals should not go to huf account

 

[sunit123]

Duede , completely agree on asset transfer to and from huf is a black hole and no one does or recommends it.

Business is a virtual entity where the building/asset is a rented to karta or owned by karta in general or owned by any huf member

And then they do business on huf pan

Just sort out the business ownership issues in advance before forming HUF....At the start of the business, it looks good....When the business will become big, you will understand what i am trying to say.

Any business/property in HUF will become panchayati property/business

 

[avikrish]

Just sort out the business ownership issues in advance before forming HUF....At the start of the business, it looks good....When the business will become big, you will understand what i am trying to say.

If family members also you say issues, then better not to opt in, it is all about trust within family and karta has ultimate powers to do anything.

 

[APT]

Yes, I got it

Can i DM you

 

[avikrish]

Just sort out the business ownership issues in advance before forming HUF....At the start of the business, it looks good....When the business will become big, you will understand what i am trying to say.

Any business/property in HUF will become panchayati property/business

Can you elaborate what it means panchayati business ?

 

[sunit123]

Can you elaborate what it means panchayati business ?

Assuming there are 3 Co-parceners....Therefore all 3 Co-parceners and karta will have equal ownership in business i.e. 25% each but the catch is Co-parceners will have limited liability i.e. to the tune of their ownership....The bali ka bakra Karta will have unlimited liability.


In short, Co-parceners enjoy the fruit of equal ownership with limited liability...The business becomes panchayati business...

HUF is only for family business where there is no need to raise the capital and all are equal owners who don't wish to dilute their stake in business till death.

I am not getting into debate of trust and loyalty etc which can be tested only with times...However, anyone forming HUF should be fully aware of future consequences.....There can be multiple unforeseen permutation and combinations in life.