Among many amendments brought in Individuals and HUF are affected together. However Finance Bill 2012-13 has brought in two amendments which positively affect taxation of Hindu Undivided Family i.e HUF . These changes were actually a kind of clarification to make the position of already present provision in respect of HUF. The first change proposed in section 54B of the Income Tax Act which provides exemption on capital gains tax from sale of agricultural land and the second change is in section 56(2) of the I T Act .
Change in Section 54B with Respect to HUF
Capital gains on transfer of land which, in the two years preceding the year in which it has been sold, has been used for agricultural purposes by assessee or his parent, is exempt if the whole of capital gains has been reinvested in the purchase of agricultural land in the next two years.
It is now proposed that this benefit be also granted to a HUF.Accordingly, it is proposed to amend the provisions of section 54B of the IT Act to provide that the rollover relief is available if the land is used for agricultural purposes by an individual or his parent, or by a HUF. This amendment will take effect from 1st day of April, 2013 (assessment year 2013-14 ).
Amendment in Section 56(2) with respect to HUF
Under the existing provisions of clause (vii) of sub-section (2) of section 56 any sum or property received by an individual or HUF for inadequate consideration or without consideration is deemed as income and is taxed under the head “Income from other sources”. However, in the case of an individual, receipts from relatives are excluded from the purview of this section and are therefore treated as not taxable. The definition of relative as given in this sub-clause is only in relation to an individual and not in relation to a HUF.
Finance Bill 2012-13 has proposed that any sum or property received without consideration or inadequate consideration by an HUF from its members would also be excluded from taxation.
This amendment will take effect retrospectively from the 1st day of October, 2009.