Can I legally pay branch rent to HUF when the property is registered in individuals' names?

Q. I am working as Branch Manager in one of the SBI branches and I have one problem regarding the payment of rent of the building of the branch. Please advise me in this regard. The history of the case is as follows: The owners of the building are A, B and C. They have got the title registered in their joint names for the building inherited from their father in the year 2015 and they have made the rent agreement with the bank in 2015 for 15 years. The bank was paying the rent to them in the ratio of 1/3 for these years in their individual capacity. But in 2025 they have made their respective HUFs i.e. A HUF, B HUF, and C HUF and requested the branch to pay the rent to their HUF accounts without any change in the status of property i.e. property still remains in their individual name and agreement of rent is also in the individual name as landlord. Branch has already started paying the rent in their HUF accounts on their request. After joining the branch I got to know about this. I want to know whether we can pay the rent to the HUF in this situation. Is it legally right? Please help me in this regard.

An owner is only legally entitled to get rent for the property owned by him. So the bank cannot pay rent to the HUFs (Hindu Undivided Families) of the individuals who own the property in their names.

Moreover, as the agreement is executed between the bank and the individual joint owners, how can you pay the rent to their HUFs without executing a fresh agreement where the individuals can request the bank to pay the rent in the name of the HUF under the agreement?

Please note that even if they direct you to credit the rent in the name of the HUF, the bank will have to deduct tax in the name of the individual joint owners, as the income ultimately belongs to them and not their HUFs.

Procedure to receive rent in the name of HUF

In case they want to take rent for the jointly owned property in the name of their HUFs by making the HUF execute the agreement, they will have to first transfer their respective share in the joint property to their respective HUFs. 

They can either sell their respective shares to the HUF at market value through a registered sale deed. They can also gift their share in the property to their HUFs through a registered gift deed executed in the favour of their respective HUFs.

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Balwant Jain is a tax and investment expert and can be reached at jainbalwant@gmail.com and @jainbalwant on his X handle.

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