Machine Usage to create HUF Corpus
Dr Ganesh bought Medical Equipment (Ventilator, Defibrilator and Laparoscope – Rs 10 Lacs) on
name of Hospital and put to use on 31 March.
Rate of depreciation is 40%
Within 366 days he gets 52% depreciation.
Written down value (Residual value after depreciation ) after 1 year 4.8 Lacs. (15 % for 1 day and
40% for 365 days)
WDV after 2 years (2 years and 1 day) 2.88 Lac
WDV after 3 years (3 years and 1 day) 1.7 Lacs.
HUF buys these machines at 1.7 Lacs and transfer Sale consideration to Hospital.
Now HUF is owner of Machines. HUF have given machine on Rent to hospital @Rs50 K per
HUF got income of 6 Lacs.
HUF paid Insurance Policy of Members 1.5 Lac or buy ELSS
HUF income is 4.5 Lacs. Income tax is just Rs 10K
But Depreciate assets at cheaper rate under HUF and give it on Rent to business.
HUF income starts you can create corpus under HUF gradually.
Once you have corpus of 1 Crore under HUF then it can earn 10 lacs plus income on its own….
- AMC/ CMC , insurance, repairs are REVENUE EXPEDITURE( Opex)
Depreciation is CAPITAL EXPENDITURE (Capex)
- If HUF takes loan from its member to purchase pathology automatic biochemistry analyser and
HUF pays 8% interest on it , will HUF carry additional tax benefit other than tax benefits for first
10 lacs & deduction under section 80 c and 80 d
HUF get benefits of Interest and depreciation both…
- HUF is a separate PERSON and distinct entity like trust, partnership firm and company.
HUF has its own pancard, bank account, own property & own income sources.
HUF can earn from ALL sources except Salary. HUF can own house, business, capital
asset , Shares , Mutual fund , Dividend and interest income.
I n short, HUF can have ONLY passive income. If HUF has business on its name and family
members can work as employee and get salary. Salary is deducted as expenses from HUF but it
become taxable income of its members.
- Immediately after marriage HUF, Pancard and bank account should be obtained. Gifts received
in marriage are deposited in HUF account. If you have not started HUF account then next BEST
time is TODAY. Get PAN CARD and Open Bank Account.
- The corpus of HUF can be created by:
GIFT■ – Gift received from members (relatives) is TAX FREE. Gift from non relatives- Rs
50000 is Tax free. More than 50K is taxable. Fastest way to build HUF corpus is to get funds from
various sources and pay income tax•.
■LOAN■ HUF can take loan from members , banks or any person.
Loan is SAFEST way to create big corpus•. HUF would pay interest of 7-8%
Ancestral property: Grandfather or father can transfer property to HUF directly.
Income of HUF. Annual income from HUF from various sources would enhance corpus of
- BENEFITS of HUF■
Tax saving -Maximum 3 Lacs tax can be saved. Tax benefits of first 10 lacs (1.7 Lacs) &
Tax benefit for deductions 80c ,80D ( 60K). Home loan interest S24 (70K)
- DISADVANTAGES of HUF
1.Audit and accounts maintainence.
2.HUF are target for scrutiny of IT dept.
3.Property ligitations- In case of *Divorce HUF property become mess.
*’Daughter in law’ become member of HUF automatically and she can demand
*Children can start fight over HUF property.
*Daughter can demand property after marriage and Son may disagree.
- Don’t try to SHOW your professional income under HUF. HUF are on radar of IT dept. Few
might have escaped in past. But softwares and technology are advancing. It’s possible that
software detect tax evader. Especially middle class are prone to such detection. Big fish like
Neta, Babus and businessmen can easily escape but you may not be.
- HUF can buy Ambulance, Car or any machines and Give on RENT to hospital.
HUF Will get-
Depreciation (deduction )
Interest (deduction )
Rental income ( Taxable)
Hospital will get-
DEDUCTION ON Rent as expense
- Depreciation is Expenses. Machine will be out of use after few years. No questions of Capital
Expenses deduction for business
- Capex by depreciation
- Opex as expenses
- GST will be applicable if HUF gets Revenue of Rs 20 Lacs from RENT.