Ask Mint Money | HUF with taxable income needs to apply for separate PAN card

Ask Mint Money | HUF with taxable income needs to apply for separate PAN card

I have been paying a home loan but I stay in a rented accommodation. Can I claim tax deduction for house rent allowance (HRA) as well as on the interest for my home loan?

—Avik Sharma

Claiming tax exemption on HRA and tax breaks on home loans are two separate provisions under the Income-tax Act, 1961. Depending on the particular facts and circumstances, you may or may not be able to claim both the benefits.

Let’s assume you own a house in Delhi either by way of acquisition or construction (for which housing loan was taken). However, it remains unoccupied due to employment, business or profession in some other city, say Gurgaon, where you stay on rent. In such a situation, you may claim HRA exemption for the rented accommodation in Gurgaon; at the same time your house in Delhi will be treated as a self-occupied property and you shall also be entitled to claim deduction up to 1.5 lakh of interest paid by you on housing loan under section 24(b).

I am a pensioner and my son is employed in a private company. We don’t have any ancestral property but both of us have independent flats. We are a joint family. Can we file our returns under the status of Hindu Undivided Family (HUF)?

—Rohit Oza

Practically, an HUF is constituted with the marriage of a person. No formal action is required to create an HUF. However, it is important to note that till the time some capital is infused or property is thrown into the common kitty of the HUF or funds are transferred to HUF, it shall remain dormant.

As far as property/funds of HUF are concerned, it may consist of ancestral property, property allotted on partition of property, property acquired with the aid of joint family property, separate property of a co-parcener blended with or thrown into a common family pool. As such till the time your individual property is blended or categorized as an HUF property, there may not be any tax filing requirement for the HUF since there is no capital or funds in the HUF.

It is also important to take note of provisions of section 64(2), which provides that in case any income is derived from the converted property or any part thereof, it shall be deemed to be the income of individual and not the HUF. Accordingly, in a situation where you have transferred your individual property to HUF for inadequate consideration, any income generated from such property will still be taxable in the hands of the individual by virtue of section 64(2) of the Income-tax Act and not in the hands of the HUF.

To sum up, a separate return for HUF would be required to be filed only if the HUF has some taxable income out of capital infused or funds transferred to the HUF. In case the HUF has some taxable income, it would also need to apply for a separate Permanent Account Number.

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