A major part of Indian society comprises the Hindu Society. A Hindu Undivided Family is a part of the Hindu society and represents a common ancestor having all his lineal male descendants, their respective wives and children including daughters too. Daughters are also considered as the descendants of the family and so are the wives of the sons.
More commonly called the Hindu Joint family, a Hindu Undivided Family is considered more as a separate entity under the provisions of section 2(31) of the Income Tax Act,1961.
A HUF is quite beneficial when it comes to tax savings. To calculate the income of a HUF, one has to ascertain the income under different heads of income such as:-
An HUF is capable of tax deductions available under chapter VIA and the tax slab rates are the same as that of any individual taxpayer. Also, any HUF is liable to pay an Alternate Maximum Tariff if the tax to be paid is less than 18.5 percent of “Adjusted Total Income”.
In a HUF, all the tax deductions and exemptions can be claimed under section 80C. All the HUFs have their separate PAN apart from the PAN cards of the individual members.
There are no requirements for filing ITR in a HUF. Also, no documentation is required to be attached. This is applicable in manual as well as e-filing. However, these documents should be secured safely so that they can be produced before the Income Tax Department whenever required.
Fro any Hindu Undivided Family the tax is computed as:-
| Income | Tax liability | |
|---|---|---|
| 1. | Upto Rs. 2,50,000 | Nil |
| 2. | Between Rs. 2,50,001- Rs.5,00,000 | 5% of income in excess of Rs. 2,50,000 |
| 3. | Between Rs. 5,00,001 - Rs. 10,00,000 | Rs.12,500 + 20% of income in excess of Rs.5,00,000 |
| 4. | Above Rs. 10,00,000 | Rs.1,12,500 + 30% of income in excess of Rs.10,00,000 |
b) In case of an HUF opting for the new tax regime u/s 115 BAC
| Income | Tax liability | |
|---|---|---|
| 1. | Upto Rs. 2,50,000 | Nil |
| 2. | Between Rs. 2,50,001 – Rs.5,00,000 | 5% of income in excess of Rs. 2,50,000 |
| 3. | Between Rs. 5,00,001 – Rs.7,50,000 | Rs 12500 + 10% of income in excess of Rs. 5,00,000 |
| 4. | Between Rs.7,50,001 – Rs. 10,00,000 | Rs. 37,500 + 15% of income in excess of Rs. 7,50,000 |
| 5. | Between Rs. 10,00,001 – Rs.12,50,000 | Rs. 75,000 + 20% of income in excess of Rs. 10,00,000 |
| 6. | Between Rs.12,50,001 – Rs.15,00,000 | Rs. 1,25,000 + 25% of income in excess of Rs. 12,50,000 |
| 7. | Above Rs.15,00,000 | Rs. 1,87,500 + 30% of income in excess of Rs. 15,00,000 |
Apart from the various benefits, there are some disadvantages of the HUF too:-
As the HUF can accommodate a larger number of members, therefore there can be problems in managing these. Also, any decision regarding the sale of an ancestral property cannot be taken without the consent of all the members.
An HUF can be closed down with the due consent of its members. However, as per the partition, all the assets need to be distributed equally among the members, which can create big havoc.
Nowadays, families are following the nuclear family trend, instead of a joint family. More and more people are opting for separations and nobody is ready to live under any type of constraint. They are ready to pay more tax instead and stay separately.
After partitions, the income from the property which was partitioned is taxed as the individual income of the member. So, if the member forms a new HUF, the income of the property is taxed in the hands of the new HUF.
The present social structure has been disrupted and people are opting for nuclear families. However, despite having several benefits, people are overlooking the monetary gains and focussing on their personal aims.
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Yes, HUf can receive gifts from members as well as outsiders. However, the gifts received from outsiders are taxable over the limit as per section 56(2)(vii) and gifts from family members are covered under clubbing provisions of 64(2).
Yes, HUF can give gifts within a reasonable limit.
Any HUF who is not able to file the ITR-1 Form or who is not having any income under the head” Profits or Gains of business or profession” can use the return form.
A KARTA is ahead or the senior-most member of the Hindu Undivided Family.
Kerala does not follow the rule of HUF.it was abolished by the JOint family system act,1975 by the Kerala state legislature.
Yes, it is mandatory for every HUF to file for the return of income if the total income exceeds the maximum amount which is not chargeable to tax.
A HUF can be formed with just 2 members out of which 1 is a coparcener but to be taxed as an entity, there must be a minimum of 2 coparceners.
No, it isn't necessary that the HUF is a resident of India. If the affairs of the HUF are managed from outside India, the HUF would be a non-resident.
On the death of the Karta, the eldest member of the family or the eldest son of the LKARTA takes over the control, even if the deceased’s wife is still alive.
No, the daughter and the father need to be alive on the date of the amendment for the benefit of inheritance, irrespective of whether she was married or not. Hence, if the father is not alive, the daughter cannot claim the property.