What Is Hindu Undivided Family (HUF)?
By definition, HUF consists of all individuals who are lineally descended from a common ancestor and also comprises of daughters. HUF is not formed by a contract but by the status of a family i.e., it is created automatically in any Hindu Family. Having a common ancestor is a pre-requisite to form a HUF. Hindu Undivided Family (HUF) is not defined under the Income Tax Act but is covered under the Hindu Law.
How to form a HUF?
Minimum two members are required to form a HUF, constituting a joint family. A HUF is automatically formed when a person marries and start their family. It is not compulsory for the couple to have kids. Owning an estate or a property is also not mandatory to form a HUF. The Hindu Law though does not govern Buddhists, Jains, and Sikhs; it can be treated as a HUF for taxation purpose. In HUF, the income generated belongs to the whole family, instead of a specific individual. Thus, this income is then taxed in the hands of the HUF. Naturally, HUF is treated as a distinct entity for tax purposes. HUF need to have a separate PAN card and need to file separate IT returns.
One of the major benefits of the Hindu Undivided Family is that it is considered a separate legal entity. This entitles HUF to obtain a separate PAN card and bank accounts in the name of the HUF. Once a HUF is formed, typically the head of the family becomes the “Karta”. Until January 2016, women were not eligible to be the Karta of a HUF. However, the Delhi High Court, in a landmark case, gave the decision in favour of a woman being the Karta of HUF.
Basic Requirement for existence of HUF
- Only one member or co-parceners cannot form HUF.
Family is a group of people related by blood or marriage. A single person male or female, does not constitute a family.
- Joint family continues even in the hands of female after the death of sole male.
Even after the death of the sole male member so long as the original property of the joint family remains in the hands of the widows of the members of the family and the same is not divided among them; the Joint Hindu Family continues to exist.
- An HUF need not consists of two male members.
The plea that there must be at least two male members to form an HUF as a taxable entity, has no force. A father and his unmarried daughter can also form an HUF.
Who are Coparceners and Members of HUF?
The male members are called coparceners, while the females are referred to as just members. The difference between the two is that any of the coparceners can demand partition of the HUF. The female members do not have this right in most parts of the country, except for some states like Maharashtra and Tamil Nadu that have allowed unmarried daughters to function as coparceners.
The Hindu Succession (Amendment) Act, 2005 which came into force from September 9th September 2005 removed this gender discrimination by giving equal rights to daughters as sons.
The daughters become the coparceners of their father’s families on birth in the same manner as sons and have the same rights as sons in the family properties.
