HUF tax rules: Can I or my mother gift money to my HUF tax-free, and is there any limit?

A Hindu Undivided Family (HUF) can have its own PAN, hold assets and earn income separately from its members, making it a structure that some Hindu families consider for tax and investment purposes. But the rules governing how an HUF comes into existence and how money can be transferred to it are often misunderstood.

Today's Q&A explains such details in response to a query by a reader.

HUF comes into existence by operation of law and cannot be created by acts of parties except in case of adoption in the family.

All the persons who are born in the family or are adopted into the family become coparceners, whereas those who come into the family are treated as members but not coparceners. All the coparceners are members, but not vice versa.

In case you are a Hindu and married, your HUF came into existence on the day a son or daughter was born into the family. So in case there are two coparceners in the family, you already have an HUF.

Please note that there is no need to create an HUF deed as an HUF cannot be created by the act of parties. You can make an application for allotment of a PAN along with a declaration or affidavit giving details of members/coparceners with date of birth of first child in the family which is treated as date of incorporation of the HUF.

HUF can accept gifts from any person including strangers. The gifts received from its members are not treated as income of the HUF, but clubbing provisions apply in respect of income generated from gifts so received. Gifts received from non-members are treated as income of the HUF in case the aggregate of such gifts received by the HUF during the year exceeds fifty thousand rupees. There is no limit up to which an HUF can accept a gift.

As your mother is not treated as a member of your HUF, the gifts received from her will be treated as income of the HUF if the aggregate of the gifts received during the year exceeds the threshold of fifty thousand rupees. As you are treated as members of the HUF, the gifts made by you to the HUF shall not be treated as income irrespective of the quantum of the gift made, but the income generated from the gifts so made shall be subjected to clubbing provisions year after year till full partition of the HUF takes place.