Provisions of section 10(2) of the Income Tax Act exempt any sum received by a co-parcener from a Hindu Undivided Family if –

  • The sum is received out of the income of the family; or
  • The sum is received out of the income of the estate belonging to the family.

Under the present article, we would cover some of the basics of the Hindu Undivided Family; provisions of section 10(2) of the Income Tax Act and illustration to clarifying the exemption available under section 10(2).

Basics of Hindu Undivided Family

One can clear up some the fundamentals of Hindu Undivided Family, by going through the following points –

  • Hindu Undivided Family, shortly and more popularly known as HUF, is not defined under the Income Tax Act.
  • The definition of Hindu Undivided Family is covered under Hindu Law.
  • As per the Hindu Law definition, the Hindu Undivided Family comprises of all individuals, who are lineally descended from a common ancestor. Hindu Undivided Family also covers unmarried daughters.
  • As per section 2(31)(ii) of the Income Tax Act, Hindu Undivided Family is treated as a ‘person’ under the Income Tax Act.
  • Hindu Undivided Family is a separate entity for the purpose of assessment under the Income Tax Act.

Understanding provisions of section 10(2) of Income Tax Act

The provisions of section 10(2) exempt the following incomes –

1. Any amount received by a co-parcener from the Hindu Undivided Family, where the said amount should have been paid out of the income of the family; or

2. In case of an impartible estate –

Any amount received by a co-parcener from the Hindu Undivided Family, where the said amount should have been paid out of the income of the estate belonging to the family.

In nut-shell, the exemption under section 10(2) is available if the following two conditions are satisfied –

1. The individual is the member of a Hindu Undivided Family; and

2. The amount received is from the income of the Hindu Undivided Family.

Illustrations for better understanding of Section 10(2) provision

Suppose, Hindu Undivided Family has three co-parcener Mr. A, Mr. B and Mr. C. During the previous year, HUF earned INR 3 Lakhs and duly paid tax on the same. Mr. A, one of the co-parcener, is also an employee of the HUF and receives INR 10,000 per month as salary. During the year, Mr. A also received INR 1 Lakhs, out of the income, from the HUF.

Mr. A would be liable to pay income tax on the amount of salary received by him. However, the amount of INR 1 Lakhs received from the income of the HUF would be exempted in terms of provisions of section 10(2) of the Income Tax Act.

Table – Articles on Section 10 Exemptions

Sr. No. Particulars
1 Section 10(1)– Exemption to Agricultural Income
2 Section 10(2) Exemption to amount received by co-parcener from HUF
3 Section 10(2A) Exemption towards share of income from firm/LLP
4 Exemptions towards interest to non-residents | Section 10(4) & 10(4B)
5 Exemption on Tax paid by Govt or Indian concern on certain income of a foreign company
6 Section 10(7) Perquisites/allowances exemption to Govt employees serving outside India
7 Exemption- Section 10(8A) & section 10(8B) of Income Tax Act
8 Exemption towards commuted value of pension Section 10(10A)
9 Exemption towards retrenchment compensation received by workman Section 10(10B)
10 Section 10(10BC) Exemption towards compensation received on account of any disaster
11 Section 10(10C) Exemption of amount received on voluntary retirement
12 Exemption towards tax paid by employer on non-monetary perquisites: Section 10(10CC)
13 Section 10(10D) Exemption towards amount received under a Life Insurance Policy
14 Exemption for amount received from Statutory & Recognized PF
15 Exemption for payment from approved superannuation fund Section 10(13)
16 Income Tax Exemption on prescribed allowances/ benefits | Section 10(14)
17 Section 10(15) Exemption- Interest on Bonds, Debentures, Securities
18 Scholarship exemption | Section 10(16) | Income Tax Act 1961
19 Exemption towards income for administration of Charitable or Religious Institution
20 Section 10(32) Exemption | Income of minor clubbed with parent
21 Exemption for dividend income received from Indian Company | Section 10(34)
22 Section 10(34A) Exemption towards income received by a shareholder on buy back of shares
23 Section 10(35) Exemption towards income received from units
24 Section 10(37) Exemption towards Capital Gain arising on Compulsory Acquisition of Urban Agricultural Land

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