Question regarding huf

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Jignesh Desai (Querist)
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14 August 2013 A family consists of (1)A 83 Year Old Male (Mr. X) (2) His Wife (3) Elder Son (4) Elder Son's Wife (5) Elder Son's Son (6) Elder Son's Son's Wife (7) Younger Son (8) Younger Son's Wife (9) Daughter (Widow) (10) Daughter's Elder Daughter (11) Daughter's Younger Daughter . All the Member's are residing in Gujarat . Mr. X wants to create HUF Entity .

Questions :-
(1) Mr. X would be the Karta but who would be the Co-parceners ?
(2) Who would be the Members of this HUF?
(3) Is it possible if Mr. X wants to include ONLY himself , his wife & his Younger Son in this HUF & appoint his Younger Son as the Karta ?
(4) In case Mr.X's Wife wants to create the Capital of this HUF by gifting portion of her own Assets (Bank Balance) to this HUF , will any Gift Tax have to be paid by the HUF or Mr. X's Wife , & if so ,what percent ?
(5) In case , Mr. X's Brother gifts funds to this HUF (to create it's Capital) , will any Gift Tax have to be paid & if so , what percent ?
(6)What would be the Share of each Co-parcener/Member in the Property/Income of the HUF ? Please explain clearly & seperately how the share will be in case of (i) Property & (ii) Income of the HUF .
(7) What will happen after Death of the Karta ?
(8) What would be the Tax Benefits of creating this HUF ?

CA PARTH SHAH

CA PARTH SHAH (Expert)
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20 October 2014 1)Co-parceners shall be all the male members of the HUF who can claim the assests of the HUF.

2)All the members in your family, including your wife, children, their wives and their children. can be the members of HUF

3) Not possible. Eldest member in the family has to be Karta. Hence younger son cannot be appointd as Karta.HUF is created by the Hindu law which does not allow exclusion of any male members from the family. Hence Elder son has to be included in the HUF mandatorily.

5&6) Members giving gift to HUF shall be liable for clubbing provision under income tax act. Hence it is notadvisabel for any member to transfer any asset to huf. Mr. X brother can gift to huf but only upto rs 50,000. Anything in excess of Rs 50000 will be taxable in the hands of Huf. Gift tax is abolished now.

7) After the death of karta, the eldest member in the family shall be the new karta of the family.

8)An HUF is considered as seperate legal entity under income tax act 1961. Hence any income earned through the assets of the huf shall be taxed in the hands of the huf and not in the hands of individual members.

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Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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19 July 2025 1. Who would be the Karta and Co-parceners?
Karta: Mr. X (the eldest male member) will be the Karta, as per tradition.
Co-parceners: As per Hindu law, the coparceners are the male members who have a birthright by survivorship in the HUF property. Typically:
Mr. X (Father)
Elder Son
Younger Son
Elder Son’s Son (Grandson)
Younger Son’s Son (if any; not mentioned here)
Female members are generally not coparceners under the old law but after the amendment in 2005, daughters also became coparceners by birth. So the Elder Son’s Wife, Elder Son’s Son’s Wife, Younger Son’s Wife, Daughter (Widow), and granddaughters may be members but not coparceners (except daughters, who are now coparceners after amendment).
2. Who would be members of the HUF?
Members include all family members who are part of the Hindu Undivided Family.
This includes coparceners (mainly male lineal descendants), their wives, and dependent daughters.
So, Mr. X, his wife, sons, daughters, their spouses, and grandchildren can be members.
3. Can Mr. X include only himself, his wife & younger son and appoint younger son as Karta?
No, HUF is created by birth and inheritance, you cannot arbitrarily exclude legal coparceners.
Karta must be the eldest male coparcener; he cannot appoint a younger son as Karta while he himself is alive and a coparcener.
If Mr. X wants younger son as Karta, he must cease to be Karta (usually only on death or incapacity).
4. If Mr. X's wife gifts her assets to HUF, is Gift Tax applicable?
Gift tax was abolished in India since 1998.
However, under Income Tax, gifts received by HUF are taxable if received from non-relatives.
Since wife is a relative under Income Tax Act (Section 56(2)), the gift is not taxable.
No tax liability for wife or HUF on gift of bank balance from wife.
5. If Mr. X's brother gifts funds to HUF, will Gift Tax apply?
Brother is a relative, so gift to HUF is not taxable under Income Tax.
So, no gift tax on gift from brother to HUF.
6. Share of each coparcener/member in HUF property and income?
Property: Coparceners have equal rights by birth in HUF property. So share is equal among all male coparceners (including daughters after amendment).
Income: Income is owned by HUF as a separate entity, not by individual members. Distribution of income to members is possible via partition or gifts, but generally income is taxed in HUF's hands.
On partition, property is divided equally among coparceners.
7. What happens after death of the Karta?
The next eldest male coparcener automatically becomes Karta.
If no coparcener is alive, the HUF ceases.
8. Tax benefits of creating HUF?
HUF is a separate taxable entity, so it gets a separate basic exemption limit (same as individuals).
Income can be clubbed under HUF to reduce overall tax burden (subject to anti-avoidance rules).
Can claim deductions, exemptions, and carry forward losses separately.
Useful for estate and succession planning.

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