Daughter-in-law's Rental Income to HUF: Tax Implications Explained

• A daughter-in-law wants to transfer Rs 50,000 monthly rental income from her property to her father-in-law's HUF.
• Under Section 60 of the Income Tax Act, transferring income without transferring the asset means the income remains taxable for the asset owner (daughter-in-law).
• Rental income received by the HUF will be treated as a gift from a specified relative, exempting the HUF from tax liability on the gift itself under Section 56(2).
• Income arising from investments made out of the gifted rental income will also be clubbed with the daughter-in-law's income.
• If the property itself is transferred to the HUF, clubbing provisions still apply to the rental income and capital gains on sale, taxing them in the daughter-in-law's hands. However, income from reinvestment of this clubbed income will be taxed in the HUF's hands.

Why It Matters: Transferring rental income to HUF without transferring the asset leads to clubbing provisions, taxing the income to the daughter-in-law.