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Estate planning · HUF

Seeding a HUF: how to get money into it legally

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  1. Facts

    The #1 question: how do you get money into the HUF? You cannot just transfer from your personal account, that income will be clubbed back to you under Sec 99, Income-tax Act 2025 (old Sec 64) and taxed in your hands anyway.

  2. Provisions and law

    • Income Tax Act, Sec 92(2)(m) (old 56(2)(x)) | Clubbing provisions Sec 99 (old 64)

  3. Analysis

    Legal ways to seed a HUF: (1) Ancestral property received by inheritance goes into HUF automatically. (2) Gift from relatives outside the HUF (parents, in-laws). (3) Sale of HUF ancestral property, proceeds stay in HUF. (4) Business income earned by HUF as a business entity.

  4. Conclusion

    1. Ancestral property, inherited from grandfather or further ancestors
    2. Gift deed from relatives, parents, father-in-law, mother-in-law can gift to HUF
    3. Blended funds, if HUF gets property, all sale proceeds and reinvestment stays HUF
    4. NOT VALID: Personal savings transferred to HUF account (clubs back to you)

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Private placement share allotment after funding, PAS-4 and PAS-3

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