I have a huf whose karta I am. Say, I create capital through a gift in my new HUF from non-members and then invest the amount in fixed deposits. After 2-3 years I need money, so I withdraw money from those FDS. Is the recording of cash of HUF bank account considered as a partition or not? Can a Karta withdraw cash at any time of HUF bank account?
– Name withheld on request
According to the Hindu legislation, every Co-Parcener has joint rights to the ownership of the HUF and therefore a Karta can withdraw cash from the HUF bank account freely for the regular costs and maintenance of the family.
However, if the cash admissions are not for the maintenance needs of the family (for example for investments by the karta in his personal capacity), such a recording by the Karta can be treated as a receipt and as a partial distribution of the HUF.
Income tax provisions do not recognize a partial distribution and therefore all income from the amount that the Karta receives on such a partial distribution will be taxed in the hands of the Huf, although the amount received on such a partial partition will be exempt in the hands of the Karta.
During the creation of the capital of the HUF, it must also be kept in mind that gifts that the HUF received from non-members from non-members would be taxable in the hands of the HUF as income from other sources, because the exemption only applies in the case of gifts that have been received from members.
What is the TDS hiring obligation for the tenant in this scenario – there are two owners of the house and rent is received separately by both, which is less than £50,000 a month for each. But the total rent that the tenant pays at the house is more than £50,000 a month. Does TDS also have to be deducted in this case, although the person who pays and claims that HRA is only one?
– Name withheld on request
Because the rent of the tenant to every owner is not higher than £50,000 per month the requirement for TDS under section 194-IB does not apply. Section 194-IB refers to the payment of rent to a resident, and therefore the monthly limit of £50,000 would apply each recipient separately to each recipient.
HRA exemption, however, can be claimed for the full rent that is paid to both joint owners of the same real estate. While he claims HRA’s exemption, the tenant should provide the pan of both owners, because the annual rent exceeds £1.00,000.
If the monthly paid rent is greater than £50,000 to each owner, TDS must be deducted by the tenant against payment to such an owner at the rate of 2%. Such TDs must be deducted from the rent for the past month.
Recently, notifications were granted to taxpayers who demanded HRA without deduction from TDS. Although one may have to substantiate the authenticity of the HRA claim, the consequences for non-deduction of TDs, including interest, may apply if TDS applies to the rent paid and not deducted.
The above reaction is under the assumption that both owners are residents. If one of the owner is a non-resident, TDS should be deducted from a payment made to such an owner on the basis of section 195 at the rate of 30% plus applicable allowance and educational stable £50,000 a month.
Mahesh Nayak, Chartered Accountant, CNK & Associates.
