This article brings into spotlight the benefits endowed upon HUFs via Budget 2012 proposals.

Receipt of gift by HUF excluded from tax u/s section 56(2)(vii)

Any sum or property received by an individual or HUF without consideration/inadequate consideration shall not be taxable, as stipulated in the budget proposed.

The earlier intention of the provision was that any gift received by HUF from its members, if exceeded a stipulated benchmark of Rs 50000, would go on to be taxed under the head “Income from other sources” .However, in case of individuals, receipt from relatives were excluded from the purview of this section and was to be treated as non-taxable .The definition of relative (being on exemption list) will henceforth constitute members of HUFs also, and therefore form a barrier to invoke Sec 56(2)(vii).

The amendment will be effective retrospectively from 1^st October, 2009.