Legal Question in Credit and Debt Law in India

Re: Real Estate in HUF

Yes, HUF is entitled to raise loans on its property.

Re: Real Estate in HUF

In many financial transactions people buying or selling immovable property � residential, agricultural, commercial or industrial property, or any movable property -- declare their status as that of Hindu Undivided Family, or HUF. But a mere declaration by a Hindu buyer or seller of real estate, or any asset, that his status is that of an HUF cannot be accepted in law because there are certain legal requirements of a valid HUF status.

Let us look at the main aspects to be borne in mind while dealing in movable and immovable property transactions with the status of HUF which can save you a good deal of tax.

The question of HUF status for a Hindu buyer or seller of any property assumes importance because of certain tax advantages attached with HUF under the income tax and wealth tax laws. Thus, if an individual has personal income and has also HUF income, he would be entitled to have an exemption of Rs. 1.50 lakh for his individual income and another Rs. 1.50 lakh for his HUF income. Besides, he would also be eligible to a further income tax deduction or exemption of Rs. 1 lakh under Section 80C in respect of LIP premia, PPF contribution, NSC, etc., both on individual and HUF income separately. Besides, under the Wealth Tax Act, 1957 too, separate exemptions are available for individual property and HUF property.

Thus, whereas the taxable individual wealth is eligible to a general exemption of Rs. 15 lakh, the HUF�s taxable wealth is also eligible to a further general exemption of Rs. 15 lakh. Hence, persons having immovable property and jewellery and motorcars under HUF status stand to gain from the extra exemption under Wealth Tax Act as well.

One important aspect of Income Tax Act, 1961 which is to be borne in mind while effecting partition of an HUF is that only a complete partition of the HUF is permitted. This is because under Section 171 of the Income Tax Act partial partition of an HUF is not recognized in law.