The Hindu Business Line : Investing for a secure family

A HUF is a normally presumed condition of a Hindu society (CIT v Ghansham Dass Mukim — 1979; 118 ITR 930;P & H). Relying on Surjit Lal Chhabdha v CIT (1975; 101 ITR 776;SC), the question of creation of a HUF as such does not arise. What can be done is to create a corpus, which can yield income so as to make it an assessable entity. It is possible for a HUF to receive a gift.

Insofar as creating the initial corpus is concerned, the same can be done only by receiving a gift from an outsider to the HUF.

This would be because what a coparcener can do is only to blend his individual property with that of the HUF. No blending will be possible without an initial corpus.

It may, however, be remembered that only a Hindu coparcener can blend his individual property with that of the joint family.

Thus, a female member or any other member who is not a coparcener cannot blend the individual property with that of the joint property (Pushpa Devi v CIT; 1977; 109 ITR 730; SC).

The gift can be from any one including a stranger to the joint family provided there is a clear declaration of intention by the donor/testator that the gift/will is for the benefit of the HUF. This view has found favour in Pushpa Devi v CIT; CIT v M. Balasubramaniam (1990; 182 ITR 117; Mad, FB).

In your case, for creating the initial corpus, a gift can be taken from your father who will be an outsider to the HUF consisting of you, your wife and your children.

Subsequent blending of course may be done by you. You may, however, note that a gift received by a HUF will be chargeable to tax under Section 56 as `income from other sources' if the sum exceeds Rs 25,000. Also note that the clubbing provisions would be attracted where the coparcener of the HUF blends his individual property with that of the HUF. This clubbing would be attracted under Section 64(2) of the Act.

I have purchased a house, which I have registered jointly with my father-in-law. I have taken a loan of Rs 6 lakh from a bank in which both of us are co-applicants.

I pay the EMI. Can I get full tax benefits in respect of the principal and interest on the housing loan? Manoj Garg

You will be able to get the entire tax benefits in respect of the principal and interest provided you are in fact the full owner of the property.

Though the property is registered in joint names, if you are its real owner you can claim the benefits in full.

My house is under construction.

I started paying the EMI on the housing loan to the bank in the current year though the property is still under construction.

Can I claim tax benefits in respect of the EMI in the current year? Bibhuti

The interest up to the end of the year immediately preceding the year in which the construction is completed can be claimed in five equal annual instalments beginning from the financial year in which the construction is completed. The interest of the financial year in which the construction is completed can be claimed in full in that year.

The principal repayment will qualify for deduction under Section 80C in the year in which it is paid.

I am a software engineer and a tax assessee. I propose to purchase a land for constructing a house.

I have applied for a housing loan to purchase the land. Will the EMI paid on the land qualify for tax benefits? T. V. Sankar

Section 24 allows a deduction in computing income from house property in respect of any interest payable on capital if the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital. Construction of a house property will necessarily mean that a land needs to be acquired.

Therefore, it is felt that the deduction in respect of interest should be available in respect of the loan taken for purchase of the land as well. Reference in this connection may be made to Circular No 667 dated 18/10/1993 in the context of Section 54/54F where the Board had clarified that for computing the exemption under the Sections, the amount paid towards purchase of a plot and also towards construction of residential house thereon will qualify for the exemption. Section 54/54F provide for computing an exemption under the head capital gains on investment being made in a residential house.

The deduction under Section 80C in respect of the principal should also be available on the same basis in respect of the repayment of the loan.

(Mail your queries to taxtalk@thehindu.co.in or by post to `Tax Talk', Business Line, Kasturi Buildings, 859, Anna Salai, Chennai-600002)

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