The Hindu Undivided Family can best be defined as a family that consists of a common ancestor and all his lineal male descendants and their wives and unmarried daughters. The Hindu Undivided Family (HUF) cannot be created by acts of any party. The only exceptions are in the case of an adoption or a marriage when a stranger may become a HUF member. An undivided family, which is a normal condition of Hindu society, is ordinarily joint, not only in estate but also in food and worship.

A HUF is a separate entity for taxation under the provisions of S.2 (31) of the Income Tax Act, 1961. This is in addition to an individual as a separate taxable entity. This indicates that a person may be assessed in two different capacities- as an individual and as a Karta of his HUF.

What is an HUF? As the name suggests, an HUF is a family of Hindus. However, even Buddhists, Jains and Sikhs are regarded as Hindus, and can, therefore, set up HUFs. The concept of an HUF has basically evolved from ancient Hindu law. There are two schools of law governing HUFs in India-Mitakshara and Dayabhaga-and there are quite a few differences in the rights and obligations of HUF members in each of these schools. However, since the Dayabhaga school is largely confined to Bengal, we shall, in this article, only consider the provisions of the Mitakshara school, which are applicable to the rest of India.

Basic criteria for an HUF

There are some essential conditions that must be fulfilled to qualify as an HUF. These are outlined below:

  • Only one member or co-parcener cannot form an HUF;
  • The joint family continues even in the hands of females after the death of the sole male member;
  • An HUF need not consist of two male members. One male member is enough. For example, a father and his unmarried daughters may form and HUF.


The person who manages the affairs of the family is known as the karta. Normally, the senior- most member of the family acts as karta. However, a junior male member can also act as karta with the consent of the other members. This was held in Narendra Kumar J. Modi vs. Seth Govindram Sugar Mills 57 I.T.R. P510 (SC).

When is an HUF recognised? Let us answer another question before this: if you don’t have an HUF, as a male Hindu, how do you “create” an HUF? The phrase “creating an HUF” is really quite misleading because an HUF comes into existence the moment you give birth to a son (or a daughter, if she is regarded as a coparcener in the state where most of your property is located). However, even though you may already have an HUF, it may not really exist from the tax point of view unless your HUF has assets and is deriving income from those assets. Put another way, in order for an HUF to exist on tax records, it needs to have income.

Who can be members? All the members in your family, including your wife, children, their wives and their children. While the male members are called coparceners, the females are referred to as members. The senior-most male member is called the karta (manager), and a typical HUF consists of a karta, his sons, grandsons, and great-grandsons (all of whom are coparceners), and their wives and unmarried daughters (all of whom are members).

Rights of the members. The difference between a coparcener and a member is that a coparcener can demand partition of an HUF. This is by way of distribution of HUF property among the coparceners. While each coparcener would then be entitled to a share of the property, the members would be entitled to receive maintenance from the HUF. The karta generally manages the family property, which is regarded as the joint property of all the coparceners.

Daughters as coparceners. In recent times, some states like Maharashtra and Tamil Nadu have amended the Indian Succession Act to provide that all daughters who were unmarried as on the date of the amendment would be regarded as coparceners in much the same manner as the sons in the family. Subsequently, in these states, unmarried daughters as well as daughters married after the date of the amendment (in the case of Maharashtra, it was June 22, 1994) were regarded as coparceners. They are, therefore, eligible to demand partition of an HUF, and receive a share (equal to that of male coparceners) of the HUF property.

The Hindu Succession (Amendment) Act, 2005 (39 of 2005) comes into force from 9th September, 2005. The Government of India has issued notification to this effect. The Hindu Succession (Amendment) Act is to remove gender discriminatory provisions in the Hindu Succession Act, 1956 and gives the following rights to daughters under Section 6:

  • The daughter of a coparcener cell by birth become a coparcener in her own right in the same manner as the son;
  • The daughter has the same rights in the coparcenary property as she would have had if she had been a son;
  • The daughter shall be subject to the same liability in the said coparcenary property as that of a son; and any reference to a Hindu Mitakshara coparceners shall be deemed to include a reference to a daughter of a coparcener;
  • The daughter is allotted the same share as is allotted to a son;
  • The share of the pre-deceased son or a pre-deceased daughter shall be allotted to the surviving child of such pre-deceased son or of such pre-deceased daughter;
  • The share of the pre-deceased child of a pre-deceased son or of a pre-deceased daughter shall be allotted to the child of such pre-deceased child of the pre-deceased son or a pre-deceased daughter.

After the commencement of the Hindu Succession (Amendment) Act, 2005, no court shall recognize any right to proceed against a son, grandson or great-grandson for the recovery of any debt due from his father, grandfather or great-grandfather solely on the ground of the pious obligation under the Hindu law, of such son, grandson or great-grandson to discharge any such debt.

Minimum number of coparceners. An HUF can consist of just two members, one of whom is a coparcener. However, for tax purposes, the income of such an entity would not be taxed in the hands of the HUF; it would be taxed in the hands of the sole coparcener. For an entity to be taxed as an HUF, it should have at least two coparceners. Thus, the income of an HUF consisting of a husband and wife would not be taxed in the hands of the HUF, except in cases where the husband has received funds on the partition of a larger HUF.

How setting up an HUF can minimise your family’s tax liability: Have you ever wondered whether you can lower your tax liability by setting up a separate entity, a Hindu Undivided Family (HUF)? If you have, here are few pointers to help you decide whether you can, how you can, and in respect of which income you can file separate tax returns for an HUF, and lower your tax incidence.

What income is taxable as HUF income? Any income that arises on the investment of HUF funds (like interest earned on loans given by an HUF) or on the utilisation of HUF assets (like rent earned on letting out HUF property) would be regarded as HUF income. It is important that the income be earned using HUF funds or property only. If the income arises on account of the personal exertions of the karta or any other member and not on investment of HUF funds, such income would generally be regarded as the individual income of the karta or the member.

If an HUF contributes funds to the capital of a partnership firm, profit and interest received (from the firm) by a partner who represents the HUF is regarded as HUF income. This is because the income in the partner’s hands arises on investment of the HUF’s funds. However, if the karta is also paid a salary by the firm for efforts put in by him, such funds would be regarded as the karta’s individual income. Speculative profit can be regarded as the income of an HUF, particularly in cases where the HUF has paid margin money or deposits for such transactions.

Assets of an HUF. This brings us to another important question: what kind of assets can be regarded as the assets of an HUF as opposed to the assets of an individual? Assets received in the following situations would be regarded as the assets of an HUF:

  • Assets received on the partition of a larger HUF of which the coparcener was a member (like an HUF in which the coparcener’s father or grandfather was the karta).
  • Assets received as gifts by the HUF. Such gifts could be received from close relatives or close friends.
  • Assets bequeathed by a will that specifically favours the HUF. In the absence of a will, assets received on the death of a benefactor after 1956 (when the Hindu Succession Act came into force) would not be regarded as HUF property, but as individual property even though such assets have been inherited.

Although it is possible for a member of the HUF to transfer his or her individual assets to the HUF, such a transfer isn’t beneficial from the tax point of view. This is because there is no transfer of the tax liability on the income from such assets. The income would continue to be taxed in the hands of the individual who has transferred the assets, due to the tax provisions governing the clubbing of such income with the income of the transferor.

How do you boost your HUF’s funds? Given the tax provisions governing clubbing of income, how does one enhance the capital of an HUF? One way is by ensuring that gifts or inheritances meant for the benefit of all the members of a family are gifted specifically to the HUF, instead of separately to individual members of the family. In the absence of gift tax and estate duty, neither the benefactor nor the recipient would attract tax on such a transfer.

One can also enhance an HUF’s capital by borrowing funds from people who are not members of the HUF. Such funds should then be invested in the HUF’s name. This is important, as is borrowing money specifically in the HUF’s name. The income arising on such investments would then be regarded as the income of the HUF.

Another way of enhancing capital without adverse tax implications is to transfer individual funds to the HUF. These funds should then be invested in tax-free instruments, like the Reserve Bank of India’s relief bonds, and units of mutual funds, in the HUF’s name. Since the income from such investments is tax-free, it will not be clubbed with the individual’s income. What’s more, the income arising on the reinvestment of such tax-free income (which may be in taxable income-yielding assets) will not be clubbed, since only income arising on transferred amounts is clubbed.

Consider this rider. As with all other tax planning, a word of caution: HUF funds are joint funds of a family and cannot be equated with individual funds. Although as karta you may have control over the HUF’s funds, in the event of a dispute with a family member, the member would be justified in demanding partition of the HUF and a share of its assets.

HUF and the Joint Family Property

Often, it has been argued that the existence of nucleus or joint family property is necessary to recognize the claim of HUF status. However, it has been established since that as the HUF is a creature of Hindu law, it can exist even without any nucleus or ancestral joint property.

The following types of properties are generally accepted as joint family property:

1. Ancestral property;

2. Property allotted on partition;

3. Property acquired with the aid of joint family property;

4. Separate property of a co-parcener, blended with the family property. The provisions of S.64 (2) of the I.T. Act have superseded the principles of Hindu Law, in a case where the co-parcener impresses his property with the character of joint family property.

Please note that a female member cannot blend her property with the joint family property. However, she can make a gift of it to the HUF as was held in Puspadevi vs. CIT 109 I.T.R. p. 730 (SC). A female member may also bequeath her property to an HUF– C.I.T. vs. G.D. Mukim, 118 I.T.R. P. 930 (P&H).

Branches of HUFs

An HUF may have several branches. Let us take the example of an HUF with two sons. When the sons marry and they have their own families they will form a branch of the HUF. Likewise, when the grandsons have families, they too will be sub-branches of the HUF. As said before, it is immaterial if they possess any property or not.

Elements of partition of HUF

Having understood the essential aspects of the Hindu Undivided Family, it would be useful to consider the various means by which tax incidence with regard to HUF may be reduced. The most often-used device is to increase the number of assessable units through the device of partition of the HUF.

This can be easily done where the partition results in separate independent taxable units. For instance, this will be very useful in the case of an HUF consisting of a father and two sons, who own two factories, a house property and with other income besides this. On the other hand, if the members of an HUF have high individual incomes, partition may not be beneficial. In such a case, it would be wiser for the HUF to continue as a separate taxable entity.

It may happen that an HUF has only one business establishment that does not lend itself to any physical division. In such a case, the business may be converted into a partnership firm. However, it must be noted that the tax applicable to a company or a firm is 35%. Thus, it becomes clear that it will not be advantageous to convert an HUF business into a partnership company. Instead, it would be better to reduce taxes by paying remuneration to the members of the HUF.

Partial partition of HUF is also a device to reduce tax-liability. However, it has been derecognized by the provisions of S.171 (9) of the I.T. Act, according to which any partial partition, affected after 31.12.78, will not be recognized.

In spite of the provisions of S.179 (9), partial partition can still be used as a device for tax planning in certain cases.

An HUF that has not been assessed as undivided family can still be subjected to partial partition because it is recognized under the Hindu Law. Such partial partition does not require recognition u/s 171 of the I.T. Act. Consequently, a large HUF, which has already been assessed, can be partitioned into smaller HUFs. These smaller HUFs may further be partitioned partially before being assessed as HUFs. It is essential to clearly understand the legal implications of partition of the assets of an HUF before it is undertaken. Only then, can the true benefits of such a step gauged.

Junior Member Can Become Karta Of HUF!

Question:- My father is the Karta of the HUF which has been in operation for a few decades. He is 83 years old. In view of his old age, can he transfer the Karta ship to me? I am 31 years old, married with a child. What is the procedure for the same? Should this be declared to the IT authorities and how do I get a new PAN? Should the old PAN be cancelled? My child is a month old. Should addition of members in the HUF be declared to the IT authorities?

Answer:- It is presumption under Hindu Law, that senior most members can be Karta of the HUF. His position under the law is unchallengeable. He is manager of the assets and income of the HUF. It has been held in Narendrakumar J Modi v. CIT 1976 S.C. 1953 that in case there is agreement among members of HUF, a junior member can become Karta of the HUF.

Therefore, in your case, you can become karta , but before that its better if you get an agreement signed among all HUF members stating that your father , owing to his age , is passing on kartaship to you and that other members are agreeing to it.

As far as Income tax Act is concerned, there is not big impact for such change of guard since the income shall always be assessed in the status of HUF. The return can be signed by you. What you should do is to inform the A.O on plain paper that now you have become the Karta of the HUF and that you will be filing returns thereafter.As far as your son is concerned, he is certainly part of HUF and you can inform the I T Authorities on your own volition, and keep a record of that.

Is One Male Member Enough For HUF?

Question:- Whether a person with wife and two daughters only can have HUF?

Answer:- Whether only one male member is suffice to form an HUF is now legally well settled as per decision of Supreme Court in case of Gowli Buddana vs CIT (1966) 60 ITR 293 . An HUF is no different than a joint property. The concept of HUF is very simple codified in Hindu law .A Hindu joint family consists of lineally descended persons -like Great Grand father, Grand father ,father, uncle, son etc. All these persons have right over common ancestral property by birth. The dictum that once Hindu undivided family always Hindu undivided family” has been accepted all along.

The expression ‘Hindu undivided family’ in the Income-tax Act is same as a joint family which may consist of a single male member and widows of deceased male members. In Dr Prakash B Sultane v CIT ([2005] 148 Taxman 353) the Bombay High Court held that that the property does not lose its character merely because at one point of time there was only one male member or one co-parcener.

In this case , the assessee was a doctor by profession assessable in his hands as an individual. The assessee was a member of a bigger Hindu undivided family which was partitioned on January 1, 1972. At the time of partition and right up to January 22, 1980 the assessee was a bachelor. During these years, the income from assets on partition was assessed in his hands as his individual income.

When the assessee got married on January 22, 1980, he claimed that the income from assets received on partition is assessable in status of the Hindu undivided family consisting of himself and his wife.

The Assessing Officer observed that the decisions referred to by the assessee were considered in the judgment of the Madhya Pradesh High Court in CIT v. Vishnukumar Bhaiya (142 I.T.R. 357). Relying upon this judgment, he rejected the application of the assessee and continued to assess his income from the Hindu undivided family property in his individual capacity. In the above case also, the assessee had obtained his share on partition before his marriage and, on his marriage, had claimed the status of Hindu undivided family. His claim was rejected on the ground that “until a son is born the status of the assessee would continue to be that of an individual. However, the High Court ruled otherwise and upheld the contention of the assessee that once HUF property always HUF property”

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75 responses to “Meaning, Formation, Taxation, Membership & Partition of HUF”

  1. parin mehta says:

    Very good article
    My some question are under here
    A is the karta of A HUF ( 2002) he has
    S son & D daughter both are coparcener
    D daughter married at 22-01-05 her husband DH & her
    daughter DD
    S son married at 06-12-07 his wife SW & his
    Daughter SD
    Now who are coparcner, member & no statues
    of A HUF
    daughter side : D, DH, DD
    son side. : S, SW, SD

  2. pradeep kapoor says:

    pl tell what will be status of fdr [ 5yrs ] which was taken in huf for 80 c purpose . huf desolve due to one member [ female]mother death [ out of two with karta ] now only karta alone . fdr purchase before one month death of mother death

  3. Vikram Bhatt says:

    I have a question as follows:
    a) Can a male coparcener be head (karta) of two hufs suppose his and his father’s?
    b) Even after distribution of hufs capital can he run this huf?
    c) Can the actual members override or change the karta?
    d) Can members or coparcener be listed in more than one huf

  4. Ravichandregowda.N.R says:

    If I, Receive the Property From Mother Family can we consider as HUF & can i, ask exemption From Capiltal Gain

  5. M V Narasimha Rao says:

    can two brothers after the death of their father form HUF?

  6. kiran more says:

    Hi I want knw who all r members of huf file in my dad pan pan card

  7. Ajain says:

    I have an HUF PAN No can I open a bank account and deposit money.

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