Can my father’s self-acquired immovable property be transferred to my HUF?

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My father, who passed away in 2012, had acquired a residential flat in his name. I have no siblings and my father’s mother had passed away in 2011. So my mother and myself only are the legal heirs. Can my father’s self-acquired immovable property be transferred to my HUF i.e. son’s HUF? If such a transfer of residential flat is done, then will the rental income be taxed in the hands of the HUF’s or will it be clubbed with my income?

Answer: Since you have not mentioned whether you father had left a valid will or not, I presume that he died intestate without leaving a valid Will and therefore Section 8 read with schedule of the Hindu Succession Act, 1956 will apply in your case. As mother of your father had passed away before death of your father and since you do not have siblings, you and your mother are the only the legal heirs of the property. So you both have inherited the property equally and become equal owner of your father’s property after his death. 

So for transferring the property to your HUF both of you will have to execute gift deed in favour of your HUF. This transaction will have different tax implications in respect of your share and share of your mother in it. Since you are treated as relative of your HUF for income tax purposes and therefore the gift received by your HUF of your share in the property will not be treated as income of the HUF. However, as per the provisions of income tax laws, any income arising to the asset transferred by the member to the HUF is subject to clubbing provisions, the rental income relatable to your share shall be clubbed with your income.

As far as transfer of your mother’s share in the inherited property is concerned the market value of her share will become taxable in the hands of the HUF as your mother is not a member of your HUF. It is only the gift made by a member to its HUF which is not treated as income of the HUF. However, the clubbing provisions will not apply in respect of rental income relatable to your mother’s share so transferred.

Balwant Jain is a tax and investment expert and can be reached on jainbalwant@gmail.com and @jainbalwant on Twitter.

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