TAXATION OF HUF UNDER

THE INCOME TAX

ACT,1961

ITT PRESENTATION
Kandivali-Thakur Village
8:00-12:00
Presented as on 20/12/2010
 GROUP MEMBERS

NAME WRO NUMBER

1. Gurcharan Singh Neela WRO 0356733
2. Ashish Rai WRO 0344890
3. Kamlesh Kumar Joshi
4. Mayank Baser WRO 0380088

Gurcharan Singh : 9967716224

 INDEX
TOPICS
Introduction
Tax bracket of HUF
Money Resolution: 2010 - 2011
Taxability of gifts
Ways of partition of HUF
Tax implication – Full Partition
Tax implication – Partial Partition
Tax benefits of HUF and deductions under Chapter VIA
Capital gain exemptions on HUF
Stock market, mutual funds and HUF
Wealth Tax and HUF
HUF as a proprietor of business
Income of Member of HUF
Taxation of money received without consideration
Bibiliography
 INTRODUCTION
 A Hindu Joint Family or Hindu undivided family (HUF) or a
Joint Family is an extended family arrangement prevalent
among Hindus of the Indian subcontinent, consisting of
many generations living under the same roof.
 All the male members are blood relatives and all the
women are either mothers, wives, unmarried daughters,
or widowed relatives, all bound by the common sapinda
relationship.
 The joint family status being the result of birth, possession
of joint cord that knits the members of the family together
is not property but the relationship.
 INTRODUCTION

 The family is headed by a patriarch, usually the oldest male,

who makes decisions on economic and social matters on
behalf of the entire family.
 The patriarch's wife generally exerts control over the kitchen,
child rearing and minor religious practices.
 All money goes to the common pool and all property is held
jointly.
 There are several schools of Hindu Law, such Mitakshara, the
Dayabhaga, the Murumakkattayam, the Aliyasanthana etc.
Broadly, Mitakshara and Dayabhaga systems of laws are very
common.
 Family ties are given more importance than marital ties.
 The arrangement provides a kind of social security in a
familial atmosphere.
 KEY ASPECTS OF HUF
 Head of the family takes all decisions
 All members live under one roof
 Same kitchen is shared
 Three generations live together
For e.g. two or more brothers live together,
father and son live together or all the male
descendants live together
 Income and expenditure in a common pool
property are held together
 There is a common place of worship
 Co-
parceners

Daugh
ters

Members
of HUF

Karta
TAX BRACKET OF HUF

Range Percentage of Tax

0 – 160,000 NIL

160,000 – 500,000 10%

500,000 – 800,000 20%

800,000 onwards 30%

MONEY RESOLUTION: 2010-2011
Income of HUF can be assessed as such only if the following
conditions are satisfied:

A. There should be a co-parency

AND
There should be a joint family ancestral propertyResolution for this
financial year

For e.g. Other investments too can take place under the board head of
HUF and a HUF can open a Bank Account in its name

B. Karta must open a HUF in any Bank in the prescribed format by

giving an undertaking on a stamp paper of Rs. 100.

For e.g. A Demat account to buy shares, post office deposit and public
provident fund accounts can be opened in the name of the Karta
 TAXABILITY OF GIFTS
 All the income tax slabs, deductions and
exemptions available to individuals are
also available to the HUF even though
HUF is a separate entity

 HUF can also avail of the deduction of

Rs. 100,000 available under section 80C
 PARTITION OF HUF
 Partition is the severance of the status of Joint Hindu
Family, known as Hindu Undivided Family under tax laws.
 Under Hindu Law once the status of Hindu Family is put
to an end, there is notional division of properties among
the members and the joint ownership of property comes
to an end.
 However, for an effective partition, it is not necessary to
divide the properties in metes and bounds.
 But under tax laws for an effective partition division by
metes and bounds is necessary.
WAYS OF PARTITION OF HUF
 Total Partition

 Partial Partition
 TOTAL PARTITION
 In total partition all the members cease
to be members of the HUF and all the
properties cease to be properties
belonging to the said HUF.
 PARTIAL PARTITION
 “Partial partition” means a partition which is partial
as regards the persons constituting the Hindu
undivided family, or the properties belonging to the
Hindu undivided family, or both.
 Partition partition may be partial vis-a-vis members, where
some of the members go out on partition and other
members continue to be the members of the family.
 It may be partial vis-a-vis properties where, some of the
properties, are divided among the members other
properties continue to be HUF properties.
 Partial partition may be partial vis-a-vis properties and
members both.
 TAX IMPLICATIONS - FULL
PARITITON
 Section 171(9) of the Income Tax Act, 1961:

Where the property admits of a physical divisions, a

physical division of the property, but a physical division of
the income without a physical Division of the property
producing the income shall not be deemed to be a partition
or; Where the property does not admit of a physical division
then such division as the property admits of, but a mere
severance of status shall not be deemed to be a partition

 Assessment after partition and order is passed by the

Assessing officer
 TAX IMPLICATIONS–PARTIAL
PARITITON

 Section 171(9) of the Income-Tax Act,1961:

Partial partition after 31-12-1978 is not
recognized

 Even after Partial Partition the income of

the HUF shall be liable to be assessed
under the Income-tax Act as if no Partial
Partition had taken place.
 TAX BENEFITS OF HUF AND
DEDUCTIONS UNDER CHAPTER
VIA
 Exemption limit under income tax law of
upto Rs.1,60,000

 Deduction u/s 80C

 Deduction u/s 80CCF

 Deduction u/s 80D

 Deduction u/s 80DD

 TAX BENEFITS OF HUF AND
DEDUCTIONS UNDER CHAPTER
VIA
 Deduction u/s 80DDB

 Deduction u/s 80G

 Separate Income-Tax deduction on

interest on self occupied House
property

 No TDS on Interest
CAPITAL GAIN EXEMPTIONS ON
HUF
 Cost Inflation Index benefit available
to calculate Cost of the asset
 Tax benefit of 20% tax on Long Term
Capital Gains
 Saving Tax on Long Term Capital
Gain possible by investing in Capital
Gain Bonds Of NHAI/REC
 Long term Capital Gains Savings by
investing in Residential property
STOCK MARKET, MUTUAL FUNDS
& HUF
 HUF can have a separate Demat Account

 HUF can invest in

a) Shares of the companies in the Primary Market and
Secondary Market
b) Mutual Funds

 HUF can enjoy Tax Free Income for Income for Long Term
Capital Gains by holding shares for more than one year

 HUF can enjoy lower tax rates of 15% on short term

Capital Gains
 WEALTH TAX AND HUF
 HUF can avail of exemption of Rs.
15,00,000 for wealth tax purposes

 Exemption is also available for one

house of the HUF

 Productive assets of HUF are fully

exempt for Wealth Tax
HUF AS PROPRIETOR OF BUSINESS
 HUF can be a proprietor of one or more
than one business concern

 There is no tax audit of HUF business if

its turnover is within 60 lakhs

 When the turnover of the HUF business is

upto Rs. 60 lakhs, business Income can
be computed at 8% without books of
accounts on a presumptive basis
 INCOME OF MEMBER OF HUF
 Section 10(2) of the Income Tax Act 1961:
Any sum received by an individual from Hindu undivided
family of which, he is a member is exempt from tax

 Amount received not as a member of joint family but

in pursuance of some statutory provisions would not
be exempted from tax

 Member of joint family living apart from the other

members does not effect his/her position in law to
claim the right as per section 10(2)
TAXATION OF MONEY RECEIVED
WITHOUT CONSIDERATION
 Provisions of section 56(2)(v)
applicable even to HUF if any sum of
money is received by the HUF
exceeding RS. 50,000 p.a.

 Items received in kind are also

subject to the provisions of section
56(2)(v)
 BIBLOGRAPHY
 Principles Of Hindu Law by Noshirvan H
Jhabvala

 Answers.com
THANK YOU