The following article was first published in the Mint newspaper on 16th May, 2022. The same was written by our Private Client team at Cyril Amarchand Mangaldas, who frequently publish their comments and opinions in the Mint. The online version of the article can be found here.
I am the karta of a Hindu Undivided Family (HUF) firm. My coparceners are my wife and son. I am retired and only have rental income from a house inherited from my mother through her probated will.
Can I show my rental income in my HUF bank account? And, as and when I sell that house, can I show the sale proceeds in the HUF account? For this, do I need to transfer the house to HUF? If yes, then what is the procedure? Isn’t the property automatically treated as HUF property, as I am also the karta of the HUF?
What process is required to be followed in case the property is to be bequeathed after the demise of the testator which is as per the registered Will in Delhi after the mutation has been done in the municipal records. It needs to be further clarified whether the process of probate is also to be followed in Delhi or if a succession certificate is sufficient and who would issue the same?
– Name withheld on request
We assume you’re the sole legatee/inheritor of the house under your mom’s Will. Given that the house is bequeathed to you in your individual capability, and not to your HUF, the ownership of the house will vest in you, and not in the HUF.
Therefore, the rental proceeds from the house cannot be shown as rental income of the HUF.
Since the ownership of the house vests in you, the sale proceeds of the house cannot be shown as proceeds belonging to the HUF on account of the sale of the house by you.
Transferring the house to the HUF, and its subsequent sale from the HUF will enable you to book the sale proceeds in the HUF.
Till such time the transfer to the HUF occurs, it will continue to be treated as your personal property. Despite you being the karta of the HUF, the house will not automatically be treated as HUF property.
As regards the process of transfer of the house to HUF, given that it’s an immovable property, the same can be done through a duly stamped and registered gift deed in favor of the HUF.
The gift received by the HUF will not be treated as the income of the HUF.
However, any income arising from the house/asset transferred by a member to the HUF is subject to clubbing provisions.
Accordingly, the income derived from such immovable property shall be clubbed together with your income.
In Delhi, it is not mandatory to obtain the probate of a Will, regardless of whether it is being registered or unregistered. Therefore, in your case, assuming that the property to be bequeathed under the Will is in Delhi, there will be no requirement for the executor of the Will to make any application to the Delhi High Court for grant of probate, after the demise of the testator.