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TAX FORUM: QUESTIONS & ANSWERS
Investment by HUF on karta’s individual PAN is not illegal
It has been stated that investment of Hindu Undivided Family (HUF) funds can be made by the karta in his individual name and there is no bar in law for such action, so long as it can be identified that the source of investment was from HUF as indicated in your column in The Hindu dated October 1, 2007. However, now that PAN number is required to be quoted in all applications for investment in shares, mutual funds and fixed deposits, kindly advise which PAN whether that of the individual or HUF is to be quoted in such applications? If the individual PAN number is to find a place in the application for investment, can the assessment of HUF’s income be under HUF’s PAN number? Further, since multiple applications for allotment of shares are not entertained please advise how application for investment of HUF funds and individual’s funds can be both made simultaneously both carrying individual’s PAN in case individual PAN is to be quoted in HUF application also?
Where joint family investments are made by the karta of HUF, quoting individual (PAN), it may be presumed by the Department that the source of funds is that of the individual, but this is a presumption, that can be rebutted by showing that the individual was acting on behalf of the HUF and that the source as well as income is accounted in the hands of the individual.
It is not the PAN, which decides the liability to income-tax.
In view of the need for individual to act on behalf of the HUF, which is permissible under the Hindu law and other laws and the fact that investment in a separate number for HUF involves problems of repayment on death of karta for lack of nomination facility, such a recourse would be justified.
The reader has raised a further issue. He wants to apply for allotment both in the capacity of individual and HUF.
As long as the reader is able to show that the funds came from two different sources, individual and HUF, a single application can be made, so that the allotment, if it materialises, can be proportionately accounted.
S. RAJARATNAM
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