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HUF Formation and Tax Implications for Family Income - Mihir's Advice

Mihir

Mihir Tanna  |1033 Answers  |Ask -

Tax Expert - Answered on Sep 21, 2024

Mihir Ashok Tanna, who works with a well-known chartered accountancy firm in Mumbai, has more than 15 years of experience in direct taxation.
He handles various kinds of matters related to direct tax such as PAN/ TAN application; compliance including ITR, TDS return filing; issuance/ filing of statutory forms like Form 15CB, Form 61A, etc; application u/s 10(46); application for condonation of delay; application for lower/ nil TDS certificate; transfer pricing and study report; advisory/ opinion on direct tax matters; handling various income-tax notices; compounding application on show cause for TDS default; verification of books for TDS/ TCS/ equalisation levy compliance; application for pending income-tax demand and refund; charitable trust taxation and compliance; income-tax scrutiny and CIT(A) for all types of taxpayers including individuals, firms, LLPs, corporates, trusts, non-resident individuals and companies.
He regularly represents clients before the income tax authorities including the commissioner of income tax (appeal).... more
Asked by Anonymous - Aug 01, 2024Hindi
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Hi Mihir, hope you are well. I want to create an HUF (Karta) with my wife + 2 minor daughters (members). The main purpose is to save tax by creating FDs in HUF. We want to have a good corpus there eventually (2 crore +) so that income generated by HUF can be used by us to cover our yearly expenses. I have a few questions. 1. If both me and my wife transfer some money (don't know what would be the best way - gift, loan or just transfer as initial capital) say 25 lakh each to HUF which we will then put in FD. Will the interest on this FD will be taxable in the hand of HUF or it will be clubbed with me and my wife's income. Both me and my wife are in 30% tax bracket. 2. What is the best (tax efficient) way to take out money from HUF and use it.

Ans: As money is contributed by member of HUF, income generated out of investment will be Income of HUF. Once money is invested in HUF, withdrawal is usually not allowed except in few circumstances
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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