Hindu Undivided
Family:- In Ancient India, there was a system called ‘Dayabhaga System’ in
which the father has the all power of joint family property as well as he has
the executive power and no member of the family can enforce to divide the
property or to claim his/her share as long as the father alive.
But a new law
‘MITAKSHARA LAW’ differs this system as the property can be divided in tenure
of father alive.
The ‘Dhayabhaga System
is in West Bengal and eastern seven states. Rest of the country is governed by
‘Mitakshara law’.
The Indian government
has amended these laws and bring inline one law which is called’ HINDU UNDIVDED
FAMILY’ law or ‘HINDU SUCESSION ACT 1956.
Moreover government
has amended some changes in this law on 9th September, 2005.The amendments are as follows.
1- The daughter could
also be a coparcener like the sons of the HUF.
2- She also continues
to be a coparcener after her marriage of that family whether she also will be a
member of HUF of her husband.
3- Coparcener is the
person who has the right to demand the share of the property of family if
he/she wants to part away with the family with his/her share.
4- The degree of the
coparcener limited to four degree and not all the members of the family are
coparcener which is as follows.
- First time holder of
the property
- Sons & Daughter
- Grandsons
- Great Grandsons
5- For creating the
HUF one need to get married, as soon as one take seven circles(SAATH PHERE) the
HUF created. There is no need to have child or children for creating the HUF.
6- No unmarried man
can’t create a HUF. One should marry first to create HUF. The Hindu is always a
member of HUF as soon as he/she takes birth of his family. But to create own
HUF one must marry first.
7- The KARTA which is
the Hindi word means ‘DOER’ has the immense power of all the affairs of the
family more than any of the coparcener. Usually the KARTA is the father of the
family who has the right to do all the things for the family.
8- The female could
also be a KARTA as the amended HINDU SUCESSION ACT in 2005 when the father
misfortunately dies and she has no brother. In that condition the daughter or
the mother can be the KARTA.
9- In HUF there could
be all the females’ members also when the husband dies and she has no sons.
10- The HUF can’t be a
partner of the firm as the HUF is not a person whereas the KARTA of HUF can be
a partner of the firm.
11- HUF can pay
remuneration to the KARTA of family for the interest and expenditure to run the
family business. in Jugal KishoreBaldev Sahai v. CIT 63 ITR 238 (SC), the
Supreme Court held that "ifa remuneration is paid to a Karta of the family
under a valid agreement which is bona fide in the interest of and expedient for
the business of the family and the payment is genuine and not excessive, such a
remuneration must be held to be an expenditure laid out wholly and exclusively,
for the purpose of the business and must be allowed as an expenditure under
section 10(2)(xv)[corresponding to the present-day Section 37(1)] of the
Act".
12- Partition of HUF:
- Partition of HUF is also a big question. The Income Tax Law doesn’t allow to
partial partition of the property of HUF. Reason is that people sometime do
partial partition of the family only to bring more income tax files and to
decrease their tax liability. So if a HUF is partitioned it should be fully
partition like each and every assets as well as liability.
HOW THE HUF CREATED
AND CREATE CAPITAL
These are the steps to
create capital of a HUF.
1- First one should
open a bank account with the name of Hindu undivided family like RAMESH HUF
with a stamp, ID Proof and the proof of the members of the family of HUF.
2- Next is to apply
for PAN (Permanent Account Number) of the income tax.
3- Now transfer money
by gifts etc to HUF capital keeping in view the clubbing provisions and tax on
gifts under Income tax act, Remember there is no Tax on gifts in kind though
they may attract clubbing provisions in some cases.
4- Stranger can gift
HUF but nor more than 50000 rupees as per section 56 of income tax act.
5- A Father can gift
to his son’s newly created HUF and not for his son but to his family according
to 64(2) and 56(2) of the income tax act.
6- HUF funds and the
affairs of the HUF are completely differs from one’s own affairs. One can do
his/her business/job freely while having the member of HUF. But HUF income and
individual income are different and to be taxed differently.
Calculate HUF income
tax with HUF Income tax Calculator
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