Inherited Shares in HUF? Beware of Tax Traps!

• Inherited shares after the Hindu Succession Act, 1956, are personal property, not ancestral; crediting them to HUF is a gift.
• Such gifts to HUF attract clubbing provisions, meaning capital gains are taxed in the individual's personal income.
• An HUF with only a husband and wife is generally not legally valid without a child or pre-existing HUF assets.
• Transferring HUF sale proceeds to a joint bank account is an unrecognized partial partition under the Income-tax Act.
• Filing an ITR for the HUF is mandatory if its total income (including clubbed income) exceeds the basic exemption limit.

Why It Matters: Using HUF for inherited shares can trigger clubbing provisions and tax scrutiny.