Tax Column

I am an individual and Co-parcener in my father’s HUF. Can I receive gift from HUF and whether there are any Tax implications? [EasyDNNnews:PaidContentStart]

HUF, i.e. Hindu Undivided Family, is a medium for holding family property and making family investment. HUF is separately assessed to tax. Contribution by members is considered capital contribution and has no tax implication in the hands of the HUF. Even an amendment is also made in the definition of 'relative' under section 56(2)(x) of the I T Act, that relative in the case of HUF means any members thereof. Thus, with this specific exemption, if HUF receives gift from any of the members, the same is not taxable and outside the purview of income tax. 

However, whether an individual who is Co-parcener can receive gift from HUF is not explicitly included in the definition of 'relative' under section 56(2)(x) of the I T Act. Therefore, gift received by you from your father’s HUF may be subject to tax implications which may lead to litigations. 

The Chandigarh Tribunal in the case of Pankil Garg has held that gift received by member of HUF is not taxable. However, the Ahmedabad Tribunal in the case of Gyanchand Bardia has held otherwise that gift received by member of HUF is taxable. Hopefully, and very soon, there may be some High Court judgement on this issue. My personal view is also that gift received by member from HUF should not be taxed as HUF consisting of all the members who are relative within the definition given under section 56(2)(x) of the I T Act. However, presently it may lead to litigation if the Officer held in your case that gift received is taxable. 

I am an individual but a non-resident both under FEMA and under the Income Tax Act. During the current financial year 2025-26, I was in India only for 90 days. I am working for one Indian employer outside India. However, for this financial year I was paid salary directly into my Indian Bank account. Whether salary received in Indian bank account has any tax implications in India? 

From your case it is very clear that you are a non-resident for the financial year 2025 26 under the Income Tax Provisions. Once you are a non-resident, your foreign sourced income earned outside India is not taxable in India. In your case it is not disputed that the salary income which was credited to your Indian bank account was earned outside India, as the services rendered by you outside India. 

It is a settled law that mere receipt of salary in India does not make it taxable for non-resident, if other conditions of section 5 and 6 of the Income Tax Act are satisfied. Even if salary received from an Indian employer does not make any difference if services rendered outside India. 

In the present case, the basic conditions for salary income to be non taxable in India is your stay in India which is less than 182 or 120 days. Further, services for which you have been paid salary are rendered outside India. Once these two conditions are satisfied, then you do not fall either under section 9(1) (ii) or section 5(2)(a) of the Income Tax Act. Therefore, in my opinion, although salary income credited to your Indian bank account, but since the services rendered by you are outside India and you are a non-resident, your salary income will not be taxed in India. 

I am running a charitable trust approved under sections 12A and 80G of the I T Act. The trust’s renewal application under section 12A and 80G rejected by the Commissioner (Exemptions) on the ground that the trust does not have explicit clauses about 'irrevocability' and 'dissolution' of the trust. Could you suggest what action we should take now and what are the chances of getting approval? 

The CIT (Exemptions), Mumbai, has rejected renewal applications for various trusts in Mumbai on similar grounds. The action is unwarranted and against the spirit of the Act. In view of so many rejections, various trusts have approached the Hon’ble Bombay High Court for justice with a request to restrain the CIT (Exemptions) in acting in arbitrary way of rejecting renewal applications of genuine charitable trusts which include the trusts running schools, balvadis, etc. 

The Hon’ble Bombay High Court in its judgement has held that the Commissioner (Exemption) cannot deny approval under section 12AB as well as under section 80G of the Income Tax Act simply on the ground that the trust deed does not have clauses about 'irrevocability' and 'dissolution'. The Hon’ble High Court has given detailed finding in an order running into 48 pages. The Hon’ble Bombay High Court accordingly quashed the order passed by the CIT (Exemptions) with clear directions not to deny approval under section 12A as well as under section 80G of the I T Act on the ground of absence of clauses pertaining to irrevocability and dissolution. 

The Hon’ble Bombay High Court in the aforesaid judgement has also given a direction that any order wherein renewal of registration of the trust is rejected on similar ground, then such order hereby is also quashed and set aside with a direction to pass orders of approval within a period of six weeks from the date of the order. 

In view of the above, you can approach the Commissioner (Exemption) with a request to cancel the earlier order and pass a fresh order and approve renewal application of 12A and 80G of the trust. You may also file an appeal before the Hon’ble Tribunal with a request to quash the order rejecting your renewal application and directing the Officer to allow your renewal application. The Hon’ble Tribunal may also hear your appeal out of turn and decide the issue in favour of your trust. 

We would be happy to address your tax-related queries. Kindly share them with us at editorial@dsij.in

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