HUF Fund Raising legal and illegal Examples while avoid clubbing

[Hitesh Sathawane]

I have created my HUF with my wife and son with no consideration or ancestral property, I am the karta of HUF

Currently I have Bonds, SGBs, Stocks and MFs and some cash, I do not have ancestral property to attach to huf currently

I want to raise funds in HUF and want to avoid clubbing provisions, also want to explore ways to legally better plan the tax and eventually start family business

I have few queries regarding below solutions and want to know if it is legal to implement it, if not what are the alternative means to achieve the same

1] Give as interest free or interest at RBI Bank Rate (2.5%) for X number of years loan to my HUF and use the money to buy bonds, Stocks or any other asset from Me, My relative or open market, Can I have a digital documentation of such loan agreement instead of stamp paper

2] Can I purchase SGBs in secondary market which are about to mature and gift to my HUF, as SGB do not have capital gains tax and once the amount is matured I can use the fund to purchase other assets.

3] Can I offer my stocks or bonds as loan and expect bank interest rate from HUF for value on execution day.

4] may be 20 years down the line I will inherit  ancestral property, what are the tax and cost implications to get the property under HUF

5] Is it possible to dissolve the current HUF and then recreate new HUF

Are there any other ways I can raise funds for HUF

What makes fund raising legal and illegal when trying to avoid clubbing

AI Summary

HUF fundraising via genuine documented loans avoids clubbing; asset transfers or gifts by members invite clubbing and tax risks.
A loan from a member to the HUF is not subject to clubbing if genuine: there must be a written agreement, repayment terms, banking trail and the liability shown in HUF books; interest may be nil and a digital agreement suffices. Money lent may be used by the HUF to acquire assets, but transfers of securities or other assets in lieu of cash by a member are transfers that attract clubbing and capital gains consequences. Gifts by members to HUF trigger clubbing; inheritance vests in HUF with predecessor's cost for capital gains.