Hindu Undivided Family (HUF)
♠ Hindu Undivided Family (‘HUF’) is treated as a ‘person’ under section 2(31) of the Income-tax Act, 1961 (herein after referred to as ‘the Act’). HUF is a separate entity for the purpose of assessment under the Act.
♠ Under Hindu Law, an HUF is a family which consists of all persons lineally descended from a common ancestor and includes their wives and unmarried daughters. An HUF cannot be created under a contract, it is created automatically in a Hindu Family.
♠ Jain and Sikh families even though are not governed by the Hindu Law, but they are treated as HUF under the Act.
Taxability of HUF:-
In order to compute the income of an HUF, one has to first ascertain its income under the different heads of income (ignoring incomes exempted under sections 10 to 13A of the Act). The following points should be keep in mind while computing income:
■ If funds of an HUF are invested in a company or a firm, fees or remuneration received by the member as a director or a partner in the company or firm may be treated as income of the family (if fees or remuneration is earned essentially as a result of investment of funds).
■ However, if fees or remuneration is earned for services rendered by the member in his personal capacity, it will be treated as the personal income of the member.
■ If any remuneration is paid by the HUF to the karta or any other member for services rendered by him, remuneration is deductible from income of HUF if such payment is genuine and not excessive and paid under a valid andbona fide agreement.
The following incomes are not taxed as income of HUF:-
■ If a member has converted or transferred without adequate considerationhis self-acquired property into join family property, income from such property is not taxable in hands of the family.
■ Income of impartible estate (though it belongs to family) is taxable in the hands of holder of estate and not in hands of HUF.
■ Personal income of the members cannot be treated as income of HUF.
■ “Stridhan” is absolute property of a woman, hence income arising therefrom is not taxable as income of HUF.
■ Income from individual property of daughter is not taxable in hands of HUF even if such property is vested into HUF by daughter.
1 Deduction from gross total income: AnHUF is entitled for deductions available under Chapter VI-A (as applicable) while calculating its taxable income.
2 Rate of Tax:
■ An HUF is taxed on same slab rates which are applicable to an Individual.
■ An HUF is liable to pay Alternate Minimum Taxif the tax payable is less than 18.5 per cent (including cess and surcharge) of “Adjusted Total Income” subject to prescribed conditions.
Who should file return of income?
- Who should file return of income?
- Documents required to be attached with the return of income
- How to file return of income?
- Due dates for filing returns of income/loss
- Filing a revised return to correct a mistake in return filed earlier
- Can a return be filed after the due date?
- Am I required to keep a copy of the return filed as proof and for how long?
Every HUF has to file the return of income if his total income (including income of any other person in respect of which he is assessable) without giving effect to the provisions of section 10A, 10B or 10BA or Chapter VIA (i.e., deduction under section 80C to 80U), exceeds the maximum amount which is not chargeable to tax i.e. exceeds the exemption limit.
Documents required to be attached with the return of income
ITR return forms are attachment less forms and, hence, the taxpayer is not required to attach any document (like proof of investment, TDS certificates, etc.) along with the return of income (whether filed manually or filed electronically). However, these documents should be retained by the taxpayer and should be produced before the tax authorities when demanded in situations like assessment, inquiry, etc.
However, in case of a taxpayer who is required to furnish a report of audit under section 10(23C)(v),10(23C)(vi), 10(23C)(via), 10A,10AA, 12A(1)(b), 44AB, 44DA, 50B, 80-IA,80-IB,80-IC,80-ID, 80JJAA, 80LA,92E,115JB or 115VW shall furnish it electronically on or before the date of filing the return of income.
How to file return of income?
Return of income can be filed either in hard copy at the local office of the Income-tax Department or can be electronically filed at www.incometaxindiaefiling.gov.in
- ITR 2- For Individuals & HUFs not having Income from Business or Profession
- ITR 2A -For Individuals & HUFs not having Income from Business or Profession and Capital Gains and who do not hold foreign assets
- ITR 3- For Individuals/HUFs being partners in firms and not carrying out business or profession under any proprietorship
- ITR 4- For Individuals/HUFs having income from a proprietary business or profession
- ITR 4S (SUGAM)- For Individuals/HUF having income from presumptive business
Due dates for filing returns of income/loss
The due dates for filing return of income are as follows:
|HUF whose accounts are to be audited||30th September|
|In all other cases||31st July|
In case of an assessee having an international transaction or specified domestic transaction(s) who is required to furnish a report in Form No. 3CEB the due date is 30th November.
Filing a revised return to correct a mistake in return filed earlier
Yes, provided the original return has been filed before the due date and the Department has not completed the assessment. It is expected that the mistake in the original return is of a genuine and bona fide nature and not rectification of any deliberate mistake. However, a belated return (being a return filed after the due date) cannot be revised.
Return can be revised within a period of one year from the end of the relevant assessment year or before completion of the assessment whichever is earlier.
Can a return be filed after the due date?
Yes, if one could not file the return of income on or before the prescribed due date, then he can file a belated return. A belated return can be filed within a period of one year from the end of the assessment year or before completion of the assessment, whichever is earlier. Return filed after the prescribed due date is called as a belated return.
E.g., In case of income earned during FY 2013-14, the belated return can be filed up to 31st March, 2016. However, if return is filed after 31st March, 2015, penalty under section 271F can be levied.
Am I required to keep a copy of the return filed as proof and for how long?
Yes, since legal proceedings under the Income-tax Act can be initiated up to four or six years (as the case may be) prior to the current financial year, you must maintain such documents at least for this period. However, in certain cases the proceedings can be initiated even after 6 years, hence, it is advised to preserve the copy of return as long as possible. Further, after introduction of the e-filing facility, it is very easy and simple to maintain the copy of return of income.
Assessment of HUF:-
An HUF is recognized as a separate assessable entity under the Act. Its income may be assessed if following two conditions are satisfied:
(i) There should be a coparcenership. In this connection, it is worthwhile to mention that once a joint family income is assessed as that of HUF, it continues to be assessed as such in subsequent assessment years till partition is claimed by coparceners.
(ii) There should be a joint family property which consists of ancestral property, property acquired with the aid of ancestral property and property transferred by its members.
■ Ancestral Property: Ancestral property may be defined as the property which a man inherits from any of his three immediate male ancestors, i.e. his father, grandfather and great grandfather. Therefore, property inherited from any other relation is not treated as ancestral property. Income from ancestral property held by following families is taxable as income of HUF:
(a) A family of widow mother and sons (may be minor or major) ;
(b) Family of husband and wife, having no child ;
(c) Family of two widows of deceased brothers ;
(d) Family of two or more brothers ;
(e) Family of uncle and nephew ;
(f) Family of mother, son and son’s wife ;
(g) Family of a male and his late brother’s wife.
Note: Property obtained by daughter from joint family property would be her absolute property. Any income therefrom is chargeable to tax in her hands in the individual status only. This will also apply to any legal heir obtaining property in the capacity of a descendent.
1 Partition of HUF: Partition means division of property. Where the property is capable of admitting a physical division, share of each member is determined by making physical division of the property. On the other hand, where the property is not capable of physical division, partition shall mean such division as the property may admit.
Though partition can be claimed only by coparceners, the following persons are also entitled to their share in the property:
(a) A son in the womb of mother at the time of partition;
(b) Mother (gets equal share if there is partition between sons after the death of father); and
1.1 Assessment after partition (Section 171): Once income of a joint family is assessed as income of a HUF, it will continue to be assessed as such until one or more coparceners claim partition. Such claim must be made before the relevant assessment year. The Assessing Officer, on the receipt of such claim, must make an enquiry after giving due notice to the members and record a finding whether there has been a partition and, if so, the date of partition.
Income of the family from the first date of the previous year till the date of partition is assessed as income of HUF and, thereafter, income from the property which was subject to partition is assessed as individual income of the recipient members. If, however, the recipient member forms another HUF along with his wife and son(s), income of the property which was subject to partition is chargeable to tax in the hands of new HUF.
1.2 Partition – Total or partial: Under the Hindu law, an HUF is entitled to effect a partition which may be total or partial.
■ Total partition – where an HUF undergoes a total partition, the entire joint family property is divided amongst all coparceners and the family ceases to exist as an HUF.
■ Partial partition – A partial partition, on the other hand, may be partial as regards the persons constituting the joint family or as regards the properties belonging to the joint family or both.
(a) In a partial partition, as regards the persons constituting the family, one or more coparceners may separate from others and the remaining coparceners may continue to be joint.
(b) In a partial portion, as regards the property, a joint family may make a division and severance of interest in respect of a part of joint estate while retaining their status as a joint family and holding the rest of the properties as joint and undivided property.
1.3 Effect of partial partition [Section 171(9)]: After the enactment of section 171(9), partial partition is not recognised under the Act. The provisionsof section 171(9) is applicable on satisfaction of two conditions, firstly, the partial partition should have taken place after December 31, 1978 and secondly, such partition must have taken place in an HUF which was assessed as a HUF before.
■ If the above two conditions are satisfied, such family will continue to be assessed as if no such partial partition has taken place,i.e., the property or source of income will be deemed to be belonging to the HUF and no member will be deemed to have separated from the family.
■ Each member or group of members of such family immediately before such partial partition and the family will be jointly and severally liable for any tax, penalty, interest, fine or other sum payable under the act by such HUF, whether before or after such partial partition.
■ The several liability of any member or group members of such family will be computed according to the portion of the joint family property allotted to him on such partial partition.