Allocation of HUF in line with Hindu Regulation and Earnings Tax Regulation

According to Hindu law, either a full breakdown of the HUF property or a partial breakdown can be made.

HUF (Hindu Undivided Family) is a peculiar concept under Hindu law that does not prevail in any other religion. All of the assets of a HUF belong together to all members. Since the share of each member in the HUF assets fluctuates with death and birth in the family, no member can state their specific share in the HUF assets until a division occurs.

Types of divisions recognized under Hindu law and income tax laws

According to Hindu law, either a full breakdown of the HUF property or a partial breakdown can be made. In the partial division, not all of the HUF’s assets are distributed among all members. Partial division is when only a few HUF assets are distributed among the members. Even if a division of the entire assets of some members is made and not all members and other members remain members of the HUF, there is a partial division. However, when all assets are split in relation to all members and the HUF ends, it is called a full split.

There is no absolute limit to partial division under income tax laws, but the law does not recognize partial division. In the case of a partial split, tax law treats as if no split had taken place and the income from the transferred assets will continue to be taxed at the HUF when in reality the income could benefit the persons who own the assets under partial split. Even in the case of full division, you must submit an application to the assessor for an order to be issued for the full division of the HUF.

Once fully split, the clubbing rules will no longer apply to income from assets previously transferred by the member to the HUF, but clubbing will continue to apply to the portion of the assets held by the member’s spouse who transferred such assets to the HUF .

Who can request the allocation of the HUF credit?

All stakeholders have the right to request a split or file a splitting suit, but a member simplifier cannot request a split but can receive a share of the HUF property once a split actually takes place. All male members, whether born in the family or adopted, and daughters are co-parents and members, but all female members who join the family through marriage are simpler members. A Karta card cannot deprive anyone involved of their rights to the HUF property. The assets of the HUF belong to the Karta as well as to the Coparcener. If a co-parcener requests the division of the HUF assets, the Karta must assign his share of the HUF assets to this co-parcener.

This situation results in a partial partition. Although it is recognized under Hindu law, as described above, it is not recognized under income tax laws. Only employees of legal age are entitled to request a division and can even file a lawsuit for the division of the HUF assets. A minor is generally not entitled to request the division of the HUF’s assets, but a lawsuit can be brought on behalf of the minor if the assets are improperly sold that adversely affects the minor’s interests.

Distribution of property when dividing the HUF

If HUF’s assets are fully divided, all coparceners receive their shares in the property. After the amendment to Section 6 of the Hindu Succession Act of 1956 in 2005, daughters also become co-parents and their rights are equal to those of sons, and therefore sons and daughters receive an equal share of HUF assets when they are divided. Not only are all living members entitled to participate in the HUF assets, but also the child in the womb who is born later. In the case of the division between father and child, the mother also receives the same share as a son. Likewise, if the HUF property is divided, the mother receives a share that corresponds to the share of a son / daughter after the death of the father. The share of each branch of the family is distributed per strip and then to the fellow parcenaries of the branch per capital.

Let us understand this with an example. Suppose Mr A has a HUF with his wife W and sons B and C and a married daughter D. Both sons are married and have two children each. If the HUF assets are divided, each of A, W, B, C and D receives 1/5 of the HUF assets. B and C’s shares in HUF assets will continue to be shared equally among themselves and with their children. So everyone receives 1/15 share of the HUF assets (1/3 of 1/5 share allocated on the partition). It should be noted that the daughter takes her share as her individual property.

I am sure the discussion above will be helpful for the reader in understanding the concept of partition in a HUF.

(The author is a tax and investment expert and can be reached at [email protected])

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