Can you transfer rent from personal property to your HUF? Know the tax rules
If you own several properties in your individual name and also have a Hindu Undivided Family (HUF), you may wonder whether the rent from your personally owned property can be credited to the HUF instead.
For instance, if you own a commercial property in your name, can you ask the tenant to transfer the rent directly to your HUF bank account? More importantly, would doing so make the rental income taxable in the HUF’s hands?
The answer depends on more than just where the rent is deposited. What matters is who owns the property and who is legally entitled to the income arising from it. This becomes particularly important when the property remains in the individual’s name.
Rental income can be credited to HUF, but clubbing rules apply
Under Section 96 of the Income Tax Act, 2025, which came into effect from 1 April 2026, transferring income from an asset without transferring the asset itself does not change the tax treatment of that income. The clubbing provisions apply because ownership of the underlying asset remains important.
So, if an individual owns a commercial property but directs the rental income to their HUF account, the rent can technically be credited to the HUF. However, this arrangement does not shift the tax liability to the HUF.
Since the property continues to be owned by the individual, the rental income remains taxable in the hands of the property owner. The fact that the money is deposited into an HUF account does not, by itself, change its tax character.
The amount transferred to the HUF is also treated as a gift from the Karta to the HUF. However, under Section 92(2), such a gift cannot be treated as HUF income because the Karta, being a member of the HUF, falls within the specified-relative category.
What happens if the HUF invests the rental income?
The tax treatment can be different when the HUF subsequently invests the rental income it has received.
The original rental income remains subject to the applicable clubbing provisions and is taxable in the hands of the individual who owns the property. However, income that the HUF subsequently earns from investments made out of that amount is not subject to the same clubbing treatment.
This distinction is important because the tax treatment of the original income and the income generated from its subsequent investment can be different.
What about commission income?
A similar issue can arise with commission income.
Commission can form part of HUF income when the business is genuinely carried out through an organised business structure belonging to the HUF. But if the commission is earned primarily through the personal efforts, skills or services of the Karta or another individual member, it cannot automatically be treated as HUF income.
The key takeaway
Simply routing money through an HUF bank account does not change who is liable to pay tax on that income.
The more important questions are: Who owns the asset? Where does the income come from? And how was that income actually earned?
In the case of rental income, if the property continues to belong to the individual, merely directing the rent to the HUF does not transfer the tax liability to the HUF. The ownership of the underlying property remains the key factor in determining who is taxed on the rental income.
Disclaimer: This article is for informational purposes only and should not be considered tax or legal advice. Tax treatment can vary depending on the facts and circumstances; consult a qualified tax professional for specific cases.
