Arjuna (Fictional Character): Krishna, What is mean by HUF “Hindu Undivided Family” under Income Tax Act?
Krishna (Fictional Character): Arjuna, Generally in India mother, father, son and daughter in law, grandsons live together. In this father heads the family. In legal terms this may be known as “Hindu Undivided Family”. In HUF family members live together and shares not only estate but food and worship. As per Income Tax Act, Hindu, Jain, Shikh, Indian Buddhist can create HUF.
Arjuna: What are characteristics of HUF?
Krishna: Arjuna, in HUF senior most male member is Karta and other members of the family are Coparceners. The Karta is entrusted not only with the management of properties of the family but is also entrusted with the general welfare of the family. All the members have the equal right on the property of the HUF. Adopted children can also be member of the family. In HUF married and unmarried female are also members and in absence of elder Male, they can also become Karta.
Arjuna: Krishna, then how HUF comes into existence and how it received the property?
Krishna: Arjuna there are various modes for forming HUF. When a person gets married at that time joint family comes into existence. Otherwise HUF can come into existence or get the property from:
1. By way of will.
2. Receipts of Gifts.
3. Partition of larger Hindu Undivided Family
Arjuna: Krishna, does HUF have exemptions in Income Tax?
Krishna: Arjuna, Income Tax Act has given a separate legal existence to the HUF. In other tax laws it does not have separate existence. Generally the Income Tax provisions applicable to individual taxpayers are also applicable to HUF like Section 80 C deductions, like insurance and mediclaim premium taken for members of the HUF.
Arjuna: Krishna, can HUF be used for the tax planning?
Krishna: Many taxpayers take help of HUF for tax planning. HUF can undertake various types of businesses. HUF can be a partner in a partnership firm but salary cannot be paid to HUF. HUF can invest in stock market, mutual fund etc. Salaried person can give rent to HUF if property owned by HUF and can claim deduction of House Rent Allowance. Further if HUF has taken loan for buying house then it can take deduction of interest paid on the loan.
Arjuna: What one should learn from this HUF concept?
Krishna: Arjuna, in today’s era undivided families diminishing in Indian Culture. In the greed Independence and earning money patience, togetherness is getting vanished. In the short run nuclear families looks good but thinking about future in the long run joint families are beneficial. Further joint families can take the benefit in taxation also under HUF. I will give you a example: an Independent tree may fall in storm. But the trees in jungle may not fall in storm. Though from above trees in jungle look Independent and different but, from inside below ground, their roots are attached with each other. Hence they may not fall in storm. In Joint family also Individual members of the family look different from outside but they are attached with each other in heart with Love and affection. Therefore joint family can survive crises or sorrows easily. This is the base of Joint Hindu Family. This helps in financial and social life. But it seems that nowadays in light of independent thoughts this concept is been declining in India. Many taxpayers are just enjoying tax benefit of HUF by Tax Planning and don’t leave together, avoid this and live happily together with family.
Dear Karniti Lovers, your comments please.
Tags :Income Tax