Banks May Avoid Joint Home Loans To Father, Daughter Because Of Litigation Issues

Not all banks will readily provide a joint loan to a father and his daughter due to probability of litigation in future. This may provide the loan if you are your father’s only child and legal heir, provided he agrees to make appropriate documentation to assure the bank that you will inherit his share of the house eventually. If both of you are co-owners to the said property as well as co-borrowers to the said loan, both of you will be able to claim tax benefits to the extent of your respective shares in the loan and not in the property. The tax benefits for repayment of principal are available only under the old tax regime. The benefit for interest on home loan is available if the house property is let out and also depends on the tax regime opted for.

Under the provisions of income tax laws, any gift made by a member of the HUF to the HUF is not treated as income of the HUF. Under Section 56(2), members of the HUF are treated as relatives, so there will not be any tax liability at the time of transferring the individual assets to the HUF either on you or on your HUF.

However, under the clubbing provisions of section 64, any income which arises to the HUF from assets transferred to the HUF is required to be added to the income of the member transferring the asset and will continue to be added to the income of the donor year after year till the HUF is fully partitioned. Even after full partition of the HUF, income in respect of shares allotted to the spouse of the member shall still be clubbed in the hands of the spouse transferring the asset. Alternatively, you can consider giving a gift of the same money to other members of the HUF who have lower tax liability, instead of gifting the same to the HUF, and opt out of the clubbing provisions.

A grandfather can open a PPF account for his granddaughter if he is her guardian. The grandfather can also contribute to the PPF account of his granddaughter from his individual resources, but he cannot claim the tax benefits for the same under Section 80C.

An HUF can claim rebate under Section 80C in respect of PPF contribution made to the PPF account of any of its members. A granddaughter, if unmarried, is a member of the larger HUF of the grandfather. So, the grandfather’s HUF can contribute to the PPF account in the name of the granddaughter on behalf of the HUF and claim tax benefits under Section 80C. Please note that the HUF cannot open a PPF account in its own name. Deduction under section 80C is available only if the HUF opts for the old tax regime.