Just wondering if anyone has insight in whether we need to include income from an India HUF Return when we process a client’s foreign income. I’m processing a client’s 2020 tax return. Normally, this client has only given me their individual India return and their computation sheet, of which I prorate the current year and the prior years returns (April 1 to Mar 31 tax year) to generate their foreign income for the Canadian tax year (Jan 1 to Dec 31 tax year). This year, however, he also gave me this India HUF Return (without the computation sheet showing where the income is from).
I did some research on the HUF return so have some understanding that it often relates to gift income, but other income can be added to it. Other family members can contribute to the plan. The eldest male is responsible for the plan, has to sign off on all monetary exchanges with the plan, and files the tax return. Thus, I’m assuming that my client would be the eldest male and thus filing the return.
I haven’t been able to locate any documentation on CRA’s website, the Canada/India tax treaty, or other Canadian sources on whether I need to claim this income. I thought I would do some initial investigations on my own first before speaking to my client about it. Any thoughts are appreciated.
I’ve used in the past the CRA Dedicated Line for these kind of issues. If you don’t need an immediate answer, the service is not bad. You have to register first to receive your personal ID. If you still need answers to your HUF you should try their service. I haven’t use this service last year so I’m not sure if it’s still available. The number is 1-844-739-0019. Good luck.
That’s actually an excellent thought, Hugo. I also received that personal invitation from CRA last year to use that phone line, but didn’t bother signing up for the service. I should reconsider, considering that most of my CRA queries require level 2, level 3, or higher knowledge, so almost all of my calls are transferred to senior agents in the “Centre of Expertise” as they now call it, requiring additional wait time on hold.
Regarding my question about this Hindu Undivided Return, I was in contact with an accountant who practiced both in India and now in Canada and is very familiar with this return. He confirmed that this income is included in income. Since this income is from multiple family members, he simply divides it in equal shares between each family member and applies that portion to each family members Canadian tax return. CRA has accepted this practice. Where it was more beneficial for one family member to claim the entire amount due to being at a lower tax bracket, CRA has accepted claiming the entire amount on that individual’s tax return.
As well, in consideration that the India tax year is from April 1 to March 31, we prorate these returns to match Canada’s tax year, which also worked out better for my client, as it decreased the late filing penalties and interest payable if we claimed the entire amount.
I hope this is helpful for anyone else encountering this question.
Hope you find it more useful than I did, Gerry. I’ve used the DTS a few times, and they have never provided more information than I could find online - CRA website, information bulletins, technical interpretations, court cases, etc. Of course, some of those take a lot of time to search through, so if you haven’t already done the research yourself, you could save some time by getting DTS to track it down for you…