Analysis

Tax benefits of Hindu Undivided Family (HUF)

Greatest con trick in history
If you have to open a bank account in India there is long form to fill with lots of details. And if you want to open a current account, the bank will ask you for what you want it. Is the firm a Sole Proprietorship, Partnership, Trust, Society, Private, Public limited etc. There is one option "Hindu Undivided Family".

Isn't this interesting? How about a "Muslim Undivided Family", or even, looking at the divides in the Muslim Community, an option for "Muslim Divided Family" will be welcome. At least all the "secular" people demanding for a Uniform Civil Code will agree that all citizens be treated equally.

What is this "Hindu undivided family (HUF)"? This is defined under the Hindu Law as a family that consists of all persons lineally descended from a common ancestor, including wives and unmarried daughters. This means your membership into a HUF does not come from a contract but from your status. Even though Jain and Sikh families are not governed by the Hindu law, they can still be treated as a HUF. (Source: Rediff)


Why is it important?: Under the Income Tax Act, a HUF is treated as a separate entity for the purpose of assessment. From this stems its importance. (Source: Rediff)

Want to save taxes?: The book How to Save Income Tax through Tax Planning (FY 2009-10)" is written by R N Lakhotia and Subhash Lakhotia, two of India's top taxation experts. This book talks about "sources of tax-free incomes" and mentions "Receipts from Hindu undivided family" as one of them. The book says “Any sum received by an individual as a member of a Hindu undivided family, where the said sum has been paid out of the income of the family, or, in the case of an impartible estate, where such sum has been paid out of the income of the estate belonging to the family, is completely exempt from income tax in the hands of an individual member of the family under Section 10(2).”

Treatment of Women in HUF: The concept of HUF is based on the Hindu co-parcenary system. Women are never part of the co-parcenary and the Supreme Court recently ruled that even if no male member is left in a family, a female member cannot become karta or in-charge of the ancestral property. Since the Hindu Personal Law does not give a woman the right to partition, the ancestral or joint family properties remain undivided and she will never get any share. (Source: indianexpress.com)

Loss for the Government: A former Chief Commissioner of Income-Tax, T. C. A. Ramanujam, says "Surprisingly, the Government carries out any amount of amendment to the law without looking into the revenue loss caused by the recognition of the HUF as a separate taxable entity." (Source: Business Line)

Who wants Uniform Civil Code?: "Secular Activists" love to talk about UCC and Muslim Personal Law. I don't hear that much about HUF. Charity begins at home. The majority community should amend features in laws which favour them. Hence, before the majority pushes the minority to accept a uniform civil code, the majority should abolish such favours it has opted for itself.

Want to sing Vande Mataram?: While the HUF can save taxes and also ignore women members, for Muslims - RSS & others, want us all to sing Vande Mataram or else go to Pakistan. Till the Muslim Community does not become a "Muslim Undivided Family" we will have to listen to anything. The choice is ours.

This article appeared in The Milli Gazette print issue of 16-31 December 2009 on page no. 18

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