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Hindu Undivided Family (HUF)

Hindu Undivided Family (‘HUF’) is treated as a ‘person’ under Section 2(31) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). HUF is a separate entity for the purpose of assessment under the Act.

Under Hindu Law, an HUF is a family which consists of all persons lineally descended from a common ancestor and includes their wives and unmarried daughters. An HUF cannot be created under a contract; it is created automatically in a Hindu family.

Jain and Sikh families, even though they are not governed by Hindu Law, are treated as HUFs under the Act.

Assessment of HUF:

An HUF is recognised as a separate assessable entity under the Act. Its income may be assessed if the following two conditions are satisfied:

There should be a coparcenary. Once joint family income is assessed as the income of an HUF, it continues to be assessed as such in subsequent assessment years until partition is claimed by the coparceners.

There should be joint family property consisting of ancestral property, property acquired with the aid of ancestral property and property transferred by its members.

Ancestral Property: Ancestral property may be defined as property inherited by a person from any of his three immediate male ancestors, namely, his father, grandfather and great-grandfather. Therefore, property inherited from any other relation is not treated as ancestral property. Income from ancestral property held by the following families is taxable as the income of an HUF:

a) A family consisting of a widowed mother and sons, whether minor or major;

b) A family consisting of a husband and wife having no child;

c) A family consisting of two widows of deceased brothers;

d) A family consisting of two or more brothers;

e) A family consisting of an uncle and nephew;

f) A family consisting of a mother, son and son's wife;

g) A family consisting of a male member and his late brother's wife.

Note

Property obtained by a daughter from joint family property would be her absolute property. Any income therefrom is chargeable to tax in her hands in the individual status only. This also applies to any legal heir obtaining property in the capacity of a descendant.

Taxability of HUF

In order to compute the income of an HUF, one has to first ascertain its income under the different heads of income, ignoring income exempted under Section 10 to Section 13A of the Act. The following points should be kept in mind while computing income: