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The following article was first published in the Mint newspaper on 16th May, 2022. The same was written by our Private Client team at Cyril Amarchand Mangaldas, who frequently publish their comments and opinions in the Mint. The online version of the article can be found here.

I am the karta of a Hindu Undivided Family (HUF) firm. My coparceners are my wife and son. I am retired and only have rental income from a house inherited from my mother through her probated will. 

Can I show my rental income in my HUF bank account? And, as and when I sell that house, can I show the sale proceeds in the HUF account? For this, do I need to transfer the  house to HUF? If yes, then what is the procedure? Isn’t the property automatically treated as HUF property, as I am also the karta of the HUF? 

What process is required to be followed in case the property is to be bequeathed after the demise of the testator which is as per the registered Will in Delhi after the mutation has been done in the municipal records. It needs to be further clarified whether the process of probate is also to be followed in Delhi or if a succession certificate is sufficient and who would issue the same?

– Name withheld on request

We assume you’re the sole legatee/inheritor of the house under your mom’s Will. Given that the house is bequeathed to you in your individual capability, and not to your HUF, the ownership of the house will vest in you, and not in the HUF.

Therefore, the rental proceeds from the house cannot be shown as rental income of the HUF.

Since the ownership of the house vests in you, the sale proceeds of the house cannot be shown as proceeds belonging to the HUF on account of the sale of the house by you.

Transferring the house to the HUF, and its subsequent sale from the HUF will enable you to book the sale proceeds in the HUF.

Till such time the transfer to the HUF occurs, it will continue to be treated as your personal property. Despite you being the karta of the HUF, the house will not automatically be treated as HUF property.

As regards the process of transfer of the house to HUF, given that it’s an immovable property, the same can be done through a duly stamped  and registered gift deed in favor of the HUF.

The gift received by the HUF will not be treated as the income of the HUF.

However, any income arising from the house/asset transferred by a member to the HUF is subject to clubbing provisions.

Accordingly, the income derived from such immovable property shall be clubbed together with your income.

In Delhi, it is not mandatory to obtain the probate of a Will, regardless of whether it is being registered or unregistered. Therefore, in your case, assuming that the property to be bequeathed under the Will is in Delhi, there will be no requirement for the executor of the Will to make any application to the Delhi High Court for grant of probate, after the demise of the testator.

WRITTEN BY

For further information, please contact:

Rishabh Shroff – Cyril Amarchand Mangaldas,
rishabh.shroff@cyrilshroff.com

Rishabh is Co-Head of the Private Client practice and Head of International Business Development at the Firm, specialising in family constitutions and settlements, trusts, wills and succession planning.

Rishabh Shroff is a Partner in Cyril Amarchand Mangaldas, and operates out of the Mumbai office. After completing his LL.B from the London School of Economics, London, he joined the Firm in September 2007. He was admitted as an advocate in the Bar Council of Maharashtra & Goa (India) in 2007. He is also a Solicitor, Supreme Court of England & Wales.

Private Client Experience

Rishabh is the Co-Head of the Private Client practice at the Firm, specialising in family constitutions and settlements, trusts, wills and succession planning. He provides succession, taxation, estate and wealth planning advice to wealthy individuals and their families, who are often promoters of large family businesses. He also provides related advice to trustees and other private client service providers, such as family offices and institutional / corporate trustees.

Rishabh advises on a number of issues, including the creation and management of domestic trusts, along with advising both trustees and beneficiaries in relation to their relative rights, responsibilities and obligations. He is experienced in the drafting and creation of inter-vivos trusts and their constitutional mechanisms, and has experience in dealing with complex issues such as settler reserved powers, protector powers and appointment mechanisms. He also frequently advises on complex issues arising under the Indian exchange control regime (including in respect of Non Resident Indians and foreign trusts and companies), SEBI Takeover Regulations and the SEBI Listing Agreement, etc.

Rishabh is involved in the setting up and administration of a number of bespoke private trust companies in India. He also advises on a number of charitable and philanthropic endeavours, including on India’s statutory Corporate Social Responsibility regime.

Rishabh was featured in detail in a landmark publication on family business and the next generation of corporate India, “The Inheritors: Stories of Entrepreneurship and Success” by Sonu Bhasin (Penguin Books, November 2017)2. The said book talks about his journey in his own business, and how those personal experiences have helped him better understand the dynamics between family & business.

Japan Desk & Corporate Experience

Rishabh is a Partner in the Firm’s Corporate team, specialising in foreign investments into India, private mergers & acquisitions and joint venture transactions. He had also worked in the Firm’s Projects & Projects Finance (infrastructure) team for two years (2007 – 2009).

Rishabh is the Co-Head of the Firm’s Japan Desk, and works with Japanese clients frequently. He has been a part of the Japan Desk for over 13+ years, and during this time has advised a number of leading Japanese and international companies on their investments into India. He is responsible for managing the Indo-Japanese transactions handled by the Firm, and for building and maintaining relationships with its clients in Japan. He regularly travels to Japan for speaking and participating in various India focused seminars.

Rishabh had worked for three months in Homburger AG (Zurich) in 2008 as part of a Secondment Program between the Firm and Homburger AG. He was also seconded to Withers LLP (London) in August 2013 for four months, and to Cravath, Swaine & Moore LLP (New York) in July 2007 for five months.

WWF India

Rishabh is the Philanthropy Ambassador for WWF India. As an active philanthropist and someone who is deeply concerned about the environment, Rishabh works closely with WWF India on various policies, initiatives and activities through the year, including on matters of environmental policies and changes.

Rishabh is a keen writer, and hopes to release a number of publications in the area of Private Client law in the near future. When he is not writing, Rishabh can be found reading, travelling extensively, playing the piano or playing badminton.

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