Can Rent From Personally-Owned Property Be Credited To Your HUF? Know The Tax Rules

Taxpayers who own property individually but also have a Hindu Undivided Family (HUF) may wonder whether rental income can be routed directly to the HUF’s bank account. While it stands as a possibility to have your rent credited to an HUF account, doing so does not automatically make the rental income taxable in the HUF’s hands. The key factor here is the ownership of the property, rather than the bank account the money went to.

Says Tushar Agarwal, founder and managing partner, C.L.A.P. JURIS, Advocates & Solicitors: “Rental income is generally taxed with reference to the ownership and legal entitlement to the underlying property, rather than merely the bank account into which the rent is deposited. Therefore, if an individual continues to own the property, simply directing the tenant to pay rent into the HUF’s account will not ordinarily convert that rental income into the HUF’s income. Further, where separately-owned property is transferred or converted into HUF property without adequate consideration, the clubbing provisions can continue to attribute the income to the individual. The exact consequences, however, depends on the manner and legal substance of the transfer.”

Rental Income Remains Taxable

Under Section 96 of the Income-tax Act, 2025, which came into effect from April, 2026, transferring income from an asset without transferring the asset does not change the tax treatment and liabilities of that income. For instance, let’s say a person owns a commercial property in an individual capacity, but instructs the tenant to deposit the money in the HUF account. In such a case, the rent may physically be reaching the HUF account, but the individual continues to own the property.

Adds Tushar: “Merely directing the rent from a property personally owned by an individual into an HUF bank account does not, by itself, alter the tax character of that rental income. The fundamental principle is that tax liability follows the ownership and legal entitlement to the underlying asset, rather than the bank account in which the proceeds are ultimately received. Therefore, where an individual remains the owner of the property, the rental income would ordinarily continue to be taxable in the hands of that individual, even if the tenant is instructed to make the payment directly into the HUF’s account. The arrangement should not be viewed as a mechanism for shifting the tax incidence from the individual to the HUF.”

Ownership Matters More

For taxpayers, it becomes necessary to know that in routing personal income through an HUF, the central question is not where the money is deposited, but who owns the asset and who is legally responsible for the income. In the case of a personally-owned rental property, directing rent to an HUF account does not change or update the tax liability to the HUF.