I believe you must have heard of Hindu Undivided Family (HUF). Most of the people think that this is a person which are created by some kind of Agreements etc. Well, if you are also one of them then it’s time to bust your myth about that. Because the fact is something far different from that.
So, Let’s understand the concept in a bit detail:
1. What is HUF?
2. How HUF is created?
3. Which Individuals are part of HUF?
4. Who are Co-Parceners and Members?
- 1. Mr. X (Karta)
- 2. Son/ Daughter of Mr. X
- 3. Grandson/Granddaughter of Mr. X
- 4. Great Grandson/ Great Granddaughter of Mr. X
5. Partition of HUF?
6. Assessment after Total Partition:
7. Some Important Points:
- Is there any minimum no. of co-parceners required for an entity to be taxed as HUF?
A HUF can be formed with just two members one of whom is a co-parcener. But for an entity to be taxed as a HUF, it should have at least two co-parceners.
For example; When any HUF consist of only Husband and Wife, then there is only one co-parcener (because the wife is a member but not a co-parcener) and therefore, in such case income can’t be taxed in hands of HUF. It will be taxed in the hands of Individual Co-Parceners.
- Can HUF pay remuneration to Karta or Any Member of HUF?
Yes. As per Supreme Court decision in Jugal Kishor Baldeo Sahai Vs. CIT, such remuneration would be deductible if it is paid:
- What is the position of a Married daughter?
- Can HUF run a Sole Proprietorship Business?
Since HUF is one person as per Income Tax Act, a Proprietor of a business can be an Individual or a HUF. A Proprietorship concern is not governed by any specific law as such, and therefore there is no bar on HUF becoming a Proprietor of any concern.