Joint hindu family

Joint hindu family or Hindu Undivided Family (HUF) is an exclusive feature of Hindu Law. Joint Hindu family is a unit considers by law as separate entity for the purpose of taxation, but it is not considered as separate legal person. Present slides give an overview of Hindu undivided family and its consequences.

1. Hindu Undivided Family








Sandeep Kulshrestha
Assistant Professor,
Amity Law School,
Amity University Madhya Pradesh

2. Fundamental Principle

The fundamental principle of the Joint
Hindu Family is the Sapindaship, without
which no Joint Hindu Family can be in
existence. Therefore, Joint Hindu Family
status is ordinarily the result of blood
relation by birth or affiliation by adoption
or marriage (Rukmini Bai Rathor v. CWT
(1964) 54 ITR 430 (Orissa).

3. Fundamental Principle

Joint Hindu Family is a creature of law
It can not be created by act of parties,
except the affiliation by adoption and
marriage.
Absence of an antecedent history of
jointness between a Hindu male and his
ancestors is no impediment in starting his
own family and having Sapinda
relationship with his wife and progeny.

4. Creation of HUF

A Hindu male can constitute an undivided
Hindu family even with the wife and
daughter.
A sole-surviving coparcener is capable of
procreating and the family has the
potentiality to add a coparcener.
A Joint Hindu Family normally joint in
food, worship and estate.

5. The property of a Joint Hindu Family may
consist of
◦ancestral property,
◦joint acquisitions
◦self acquisitions thrown into the common stock

However, even in the absence of any property,
the Joint Hindu Family may still be in
existence as a Joint Hindu Family (Damodar
Krishnaji Nirgude v. CIT (1962) (Bombay).

JHF Property

6. Family must be joint
Joint and undivided family is the normal
condition of Hindu Society and members
are living in a state of union (Hira Chand
Vastaram v. CIT (1965)58 ITR 533(Cal).
However, branches of family, wife-wise, is
not recognized as separate Joint Hindu
Family (Kalyani v. Narayanan AIR 1980 SC 1173).

7. Schools of Hindu Law
There are TWO principal schools of Hindu
Law, namely, the Mitakshara law, which
is prevalent throughout India except
Bengal and the Dayabhaga law which is
applicable in Bengal. The Mitakshara
school is further sub-divided into four
minor schools, namely, Benaras School,
Mithila School, Bombay School and
Madras School.

8. Schools of Hindu Law
Hindu Law
Mitakshara
(All India
Except Bengal)
Benaras School Mithila School Bombay School Madras School
Daybhag
(Bengal Only)

9. Matriarchy & Patriarchal system
In certain parts of Southern India,
“Matriarchy system” is prevalent, which is
in contradistinction to the rest of India,
where “Patriarchal System”, which
represent the family having the common
male ancestor as the founder. The
Patriarchal System is well established and
judicially recognized in whole of the
country

10. Applicability of Hindu Law
Hindu laws are also applicable on Jains and
Sikhs families alike of major branches of
Hindu Law by the four statutes , viz., The
Hindu Marriage Act,1955, The Hindu
Succession Act,1956, the Hindu Minority
and Guardianship Act,1956 and the
Hindu Adoption and maintenance
Act,1956.

11. Effect of Conversion on JHF
Persons following other religions are not
constituting Hindu Families, even though
in certain parts of the country converts
from Hinduism to Christianity are
governed through force of customs by the
Hindu laws of succession, but their
families are not Hindu Joint Families
(P.F.Pinto v. CWT (1967)65 ITR 123
(Mysore).

12. Effect of Conversion on JHF
 A Hindu declares for Special Marriage Act
that he is not profess the Hindu religion,
does not cease to be a Hindu. Such a
person along with his son can constitute
HUF in respect of his ancestral properties.

However, a person married to a Christian
lady and his daughter is also a Christian ,
he alone can not constitute an HUF.

13. Joint Family is such every coparcener has
a vested joint interest and joint
possession.
Therefore, a Joint Family is not entitled to
sue nor can it be sued as a legal person
 However, HUF is treated separately for
taxing unit distinct from members/
coparceners constituting it under the
specific provisions of the IT Act,1961.
HUF is a distinct legal
entity?

14. HUF is a distinct legal
entity?
HUF is not a distinct legal entity for all
purposes from those who constitute it.
A Mitakshara coparcenery Is a creature of
law and can be disrupted at will by any
coparcener demanding partition.
The Hindu coparcenery represents a
natural relationship constituted primarily
by birth or affiliation by adoption and
marriage (N. V. Subramanian v. WTO (1960) 40 ITR 567 (AP)

15. JHF and Mitakshara and
Daybhag
A Joint Hindu Family under Mitakshara
and Dayabhaga laws are alike normally
joint in food, worship and estate and the
nature of properties are also same i.e
ancestral properties, joint acquisitions
and self acquisitions thrown into common
stock. Also the basic concept of who can
be members of HUF are also same in both
the laws. Still there are vital difference
between the two.

16. Mitakshara school
Coparcenery is the feature of Mitakshara
school and each son acquires on birth an
equal interest with his father in all
ancestral property held by the father and
on death of father the son takes the
property not as his heir but by
survivorship. The essence of Coparcenery
is Community of Interest and Unity of
Possession. Here “Aggregate Ownership” is
in existence and on partition

17. Acquisition of Coparcenery
Hindu Male governed by
Mitakshara
By birth Son Acquires
Coparcenary Property
share 1/2
By birth of Second Son
share become 1/3
*Father loses his share with every new
birth so also every coparcener does

18. Father
1/3
Share
Son 1/3
Share
Wife
Daughter
Son 1/3
Share
Acquisition of Coparcenery

19. Acquisition of Coparcenery
Father
1/3
Share
Son 1/3 +
1/3 X 1/4
Share
Wife +
1/3 X 1/4
Share
Daughter
+ 1/3 X
1/4 Share
Son 1/3 +
1/3 X 1/4
Share

20. Acquisition of Coparcenery
Father
1/4
Share
Son 1/4
Share
Wife
(1/4 x
1/4)
Daughter
1/4
Share
Son 1/4
Share

21. Dayabhaga school
In Dayabhaga school , the sons do not
acquire by birth any interest in the
ancestral property of their father, their
rights arise for the first time on death of
the father. Here on death sons take the
property as heirs and not as survivors.
Therefore, there is no coparcenery during
the lifetime of the father and sons can not
demand partition under Dayabhaga
school during father’s life.

22. Daybhag Coparcenary
The essence of family is the “Unity of
Possession” only. Here, “Fractional
Ownership” is recognized. On death of
father each son takes “definite share in
the property”, which does not fluctuate
with births and deaths in the family. On
partition, “Splitting up of Joint
Possession” and “assigning a specific
portion of the property” to the coparcener
is taking place.

23. HUF & Coparcenacy

Under Mitakshara school, the Karta has limited
power of disposal over the family properties.

Under Dayabhaga school, the father has
absolute rights of alienation regarding the
ancestral property.

24. HUF consists of persons lineally descended from a
common ancestor, including wives and unmarried
daughters, who are united by the tie of Sapindaship
arising by birth, marriage or adoption.
Hindu Coparcenery comprises only Hindu Male and
those persons who acquire by birth an interest in the
joint or coparcenery property( N. V. Narendranath v.
CWT (1969) 74 ITR 190(SC).
Both above terms are creature of law and can not be
created by act of parties.
The concept of coparcenery involves “community of
interest, unity of possession and common enjoyment”.
As such until partition taking place, the possession
and enjoyment is common and extending to whole
property.
However, after recent amendment in 2005 in Hindu
Succession Act,1956, the difference between the two
terms have virtually been removed.

25. Karta of HUF

 Karta acts for the HUF is normally the eldest male member. A
coparcener can only be Karta. A person can act Karta for bigger
HUF and smaller HUF as well. Karta has defined rights and by
actions Karta binds every member of the family

HUF comes into existence on marriage itself ? Yes;

It is true that upon partition, a single divided coparcener in the
absence of other members in his branch, does not constitute an
HUF (C. Krishna Prasad v CIT). But the inherited property does
not loose its character of joint family property. Once such person
marries, a Joint Hindu Family comes in to existence (Prem Kumar
v. CIT). It is more so because, under Sec.18 of the Hindu
Adoptions and Maintenance Act,1956, a Hindu wife can enforce
her right from the moment of marriage by creating a charge on
husband’s property, either self acquired or ancestral. Therefore,
the status of the family is of HUF (Ashok Kumar Ratanchand v.
CIT ; Also see L. Hriday Narain v. ITO (1970) 78 ITR 26 (SC).

26. Persons to whom Hindu Law
applies?

To Hindus by birth and by religion alike (Converts to Hinduism)
To illegitimate child where both parents are Hindus
To illegitimate child where father is Christian and mother is Hindu and child
is brought up as Hindu
To Jains, Buddhists in India, Sikhs and Nambudri Brahmins
To a Hindu re-converts
To sons of Hindu dancing girl converted to Ishlam, where sons are brought
up as Hindu by Grand Parents
To Brahmos, to Aryasamaji and to Santhal
To Hindus who have declared otherwise for Special Marriages Act,1872

Hindu Law does not apply :-

to illegitimate child of Hindu father from Christian mother
to Hindu converts to Christianity
to Hindu converts to Islam
.

27. Migration

In case of migration of a Hindu from one place to
other, his/her original status will remain until under
local customs and law he /she changes his basic
customs .

What constitute Customs?
A custom is a rule, which obtain the force of law from
long usage in a particular family or a class or
community or in a particular area and district of the
State.
Hindu customs recognized by courts are as follows:
-Local customs
-Class customs
-Family Customs
.

28. HUF – law

 Can Male member with wife & unmarried daughter form HUF ?
Yes [Surjit Lal Chhabda v. CIT (1975) 101 ITR 776 (SC)]


Can a single male member,after his marriage form a HUF?
Yes [CIT v. RM. AR. AR. Veerappa Chettiar (1970) 76 ITR 467SC)]


HUF cannot be created by act of parties but a corpus
can be created for an already existing HUF through the medium of a gift
or will etc

29. HUF – law

Can a person be a member of more than one HUF?
Can the wife severe from membership of HUF by unilateral
declaration, yet retain the marital tie?



A Hindu male having two wives and sons from each would
have one HUF or two?
One, Kalyani v. Narayanan AIR 1980 SC1173

HUF is not a distinct entity for all purposes.





No, CWT v. M.A.R. Rajkumar (1997) 226 ITR 804 (AP) (FB)

30. Female is coparcener in HUF

On and from the commencement of the Hindu Succession
(Amendment) Act, 2005 in a Joint Hindu Family governed by
the Mitakshara law, the daughter of a coparcener shall :-

by birth become a coparcener in her own right in the
same manner as the son;
have the same rights in the coparcenary property as she
would have had if she had been a son;

be subject to the same liabilities in respect of the said
coparcenary property as that of a son.

31. Partnership and HUF

An HUF cannot become a partner in a firm.
The Karta or a member of the HUF can represent the HUF in a firm.
 A female member can also represent HUF in a partnership firm
- CIT v. Banaik Industries 119 ITR 282(Pat.)

Remuneration received by a member of HUF from a firm, where he was
partner on behalf of HUF for managing firms business was his individual
income
- CIT v. G. V. Dhakappa 72 ITR 192 (SC); Premnath v. CIT 78 ITR 319(SC).


Partnership between HUF and coparcener as working partner is valid

32. Tax advantages of HUF

HUF is a separate entity for taxation under the provisions of sec.
2(31)

Separate exemption limit under Income-tax Law of Rs. 1,60,000


Separate deduction u/s 80G, etc.


Separate deduction u/s 80C.


Separate partnership share.


Separate Income-tax Deduction on Interest for self occupied
House Property

33. Capital Gain Exemptions for 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 Gains
Bonds of NHAI / REC

Long-term Capital Gains Saving by investing in Residential
Property

34. Investment in shares & MFs

HUF can have a separate Demat Account.

Can invest in shares of companies :-
(a) Primary Market
(b) Secondary Market

Enjoy Tax Free Income for Long-term Capital Gains by holding shares
for more than one year
Enjoy lower tax rate of 15% on Short-term Capital Gains.
Can also invest in Mutual Fund

35. Wealth Tax on HUF



Separate exemption of Wealth-tax for HUF’s upto
Rs. 30 lacs Wealth.

One House Wealth Tax Free

Productive assets of HUF fully exempt for Wealth-
tax

36. Real Estate in name of HUF

Self occupied one Residential House & the tax gain
specially by way of Interest on Loan & Repayment of
Loan

Special 30% deduction on Rental Income also to
HUF.

Exemption from Wealth-tax the real estate of HUF
(Commercial / Rented Residential)

37. HUF can run a business

HUF can be a Proprietor of one or more than one
Business concerns.

Separate name can be kept of HUF business entity.

No tax Audit of HUF business if Turnover within Rs.
60lakhs.

Presumptive taxation u/s 44AD

38. Member’s Income

As per section 10(2) of the Income-tax Act, 1961
any sum received by an individual from Hindu
Undivided Family of which he is member is exempt
from tax.

Amount received not as a member of Joint Family
but in pursuance of some statutory provision, etc.
would not be exempted in this clause.

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).

39. Remuneration to Karta or members

Remuneration to the Karta or other members of HUF can be
paid for services rendered to the family in carrying on the
business of the family or looking after the interests of the
family in a partnership business.
Jugal Kishore Baldeo Sahai v. CIT 63 ITR 238 (SC).

The payment must be for service to the family for
commercial or business expediency.
Jitmal Bhuramalv. CIT 44 ITR 887(SC).

Remuneration paid to the Karta or other members of the HUF
should be under a valid agreement. The payment must be
genuine and not excessive.
J. K. B.Sahai v. CIT, 63 ITR 238 (SC).

40. Judicial decisions HUF

Where members of HUF become the partners in a firm by
investment of family funds & not because of any Special
Services rendered by them - income will belong to HUF
– D.N.Bhandarkar v. CIT 158 ITR 724.

Where property was purchased by members of HUF with
loan from the HUF, which was later on repaid, income from
such property would be assessable as individual income
of the members –
-L. Bansidhar andSons v. CIT 123 ITR 58 (Delhi )

41. Deductions

Deduction available to HUF as per section 80C.
[Insurance Premium, PPF can be paid on the life of any
member]

Section 80D deduction available on Mediclaim Policy on the
health of any member of the family.

Section 80DD deduction for maintenance including medical
treatment of a dependant who is a HUF member.

Section 80DDB in respect of Medical treatment for any
member of the HUF.

Section 80G Donation to recognised Charity Trust.

Sections 80IA / 80IB for New Industrial undertaking.

42. Partition of HUF

The Partition of HUF can be:-

- Partial Partition


- Full Partition

43. Partial Partition of HUF


As per section 171(9) of the Income-tax Act,1961
the Partial Partition after 31-12-1978 is not
recognised.

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.

44. Full partition of HUF

As per Explanation (a) to s. 171(9) of the Income-tax Act,
1961 partition means: -

where the property admits of a physical division, 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 as per s. 171 & order to be passed
by the Assessing Officer.

45. Partition of HUF


Partition need not be by Metes & bountes, if separate enjoyment
can, otherwise the secured and such division is effective so as to
bind the members. Cherandas Waridas, 39 ITR 202 (SC).


The members of an HUF can live separately and such an act
would not automatically amount to partition of the HUF.
Shiv Narain Choudhary v CWT 108 ITR 104 (All.)

Motive or need for partition cannot be questioned by the Income
Tax D. T. G. Sulakhe v. CIT, 39 ITR 394 (AP).

46. Judicial decisions – Partition

In order to be acceptable or recognizable partition under section 171
the partition should be complete with respect to all members of HUF
and in respect of all properties of HUF and there should be actual
division of property as per specified shares allotted to each member.
– Mohanlal K. Shah (HUF) v. ITO 1SOT 316.

Setting apart certain assets of HUF in favour of certain coparceners
on the condition that no further claim in properties will be made by
them is nothing but a partial partition and not a family arrangement
not recognised in view of s. 171(9)
– ITO v. P. Shankaraiah Yadav 91 ITD 228

47. Legal aspects of Partition


Distribution of the assets of an HUF in the course of partition,
would not attract any capital gains tax liability as it does not
involve a transfer – S. 47(i)

On the basis of the same reasoning distribution of assets in
the course of partition would not attract any gift tax liability,
and

There would be no clubbing of incomes u/s 64 as it would not
involve any direct or indirect transfer.

48. Money received without consideration



Provisions of section 56(2)(vii) applicable even to HUF if any
sum of money or property is received by the HUF
exceeding Rs. 50,000 p.a. without consideration.

There is no relative of HUF
Gift by will or inheritance exempt.

Amount or property received in contemplation of death of
payer or donor exempt.

49. Gift of HUF Property

Elementary proposition that Karta of HUF cannot gift or alienate
property except to the extent recognised under the Hindu Law,
namely necessity etc –
CGT v. P. Hanumanthappa 68 ITR 363,
K.P. Gupta v. CIT 233 ITR 456

Reasonable limits depends upon facts
- CGT v. B.V.Narasimharaju 101 ITR 74

Karta can make reasonable gifts to daughters
– Sushil Kumar & Sons v. ITO 234 ITR 98

Gift on Marriage Occasion is valid
– S. Lakshmamma v. Kotayya AIR 1936 Mad. 825.

Gift of immovable property should be for pious purpose
– CIT v Ram Gopal Rajgharia 123 ITR 693

50. Gift by member to HUF


As per section 64(2) a gift by a member to his HUF after
31-12-1969 would attract Clubbing of Income in the hands of
the member and as such the income from the converted
property shall be deemed to arise to the individual & not to
the family.
And where the converted property is the subject matter of
partition, any income derived from such property by the
spouse would be clubbed in the hands of the individual.

51. Accounts and Audit


Accounts - Normal I.T. Provisions

Accounting Standards applicable

TDS provisions after achieving Tax Audit Turnover

Audit – Tax Audit u/s 44AB

Audit for claiming deductions under chapter IVA
- 80HHB 80HHBA, 80HHC, 80HHD, 80HHE, 80HHF
- 80I, 80IA, 80IB

.

52. Computation of Income

Aggregate of :-

Income under the head House Property

Profits and gains from business & profession

Income from capital gains

Income from other sources
Less: deduction under chapter VIA i.e., 80C, 80D,80DD, 80DDB, 80G,
80GGA, 80HHB, 80HHBA,80HHC, 80HHD, 80HHE, 80HHF, 80I, 80IA,
80IB,80L & 80O.


.

53. Computation of Income

Calculate Tax on Total Income
Less: relief u/s 86, 90 & 91

• Add: Interest u/s 234A, B & C
• Less: TDS & Advance Tax
• Less: Self Assessment Tax
• Balance Tax payable / Refund due

54. Tax planning through HUF


By increasing the number of assessable units through the
device of partition of the HUF;

By creation of separate taxable units of HUF through will in
favour of HUF or gift to HUF;
Through family settlement / arrangement;
By payment of remuneration to the Karta and other members
of the HUF;
By use of loan from HUF to the members of the HUF;
Through gift by HUF to its members specially to the

.

55. Thank You