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As you are aware that “Joint Families” in India are the building blocks of our society and the nation. The concept of Vasudeva kutumbakam – sometimes spelled vasudhaiva kutumbakam – is a phrase from the Hindu text the Maha Upanishad that is typically translated as “the world is one family” has emerged from Joint Family. We from ancient time considered whole world as “Joint or One Family”. From ancient era Hindus are living in a Joint Family. In Hindu Law, an Undivided Joint Hindu Family consists of all persons lineally descended from a common ancestor and includes wives and unmarried daughters.

HUF is a creation of law and cannot be created by the act of parties, except in the case of adoption by member of HUF. HUF is a separate legal entity as per section 2(31) of the Income Tax Act and therefore, as long as the HUF is in existence, no individual member can be separately assessed in respect of its income. [ITO vs. Bachu Lal Kapoor (1966) 60 ITR 74 (SC)].

Even if the family is reduced to sole – surviving coparcener (male or female) with other family members, income tax is leviable on the joint family and not on male members as individual.

A HUF, as such, can consist of a very large number of members including female members (w.e.f. 9th September, 2005, whether married or unmarried) as well as distant blood relatives in the male line. However, out of this, coparceners are only those males who are within 4 degrees in lineal descendent from the common male ancestor and including the common ancestor and the daughter of the common ancestor.

The relevance of concept of coparcener is that only coparceners can ask for partition. The other male family members; i.e., other than coparceners in a HUF, have no direct claim over HUF property, but can claim only through the coparceners. The coparcener must be a member of the family but a member of the family need not be a coparcener.


Male members lineally descended from a common male ancestor, together with their

‑ Mothers.

– Wives.

-Unmarried daughters and

-The Hindu coparcenary.

PLEASE NOTE THAT STRANGER can be introduced in HUF only by adoption [CIT vs. M.M. Khanna (1963) 49 ITR 232 (Bom)].


1. The Karta can function in Dual capacity and can claim remuneration and other benefits from the HUF.

2. Hindu Undivided family may be composed of –

i)Large or

ii) Small or

iii) Nuclear Joint Families

3. Every above said families may hold the property in its own RIGHT, may be assessed for its income as a separate unit.

4. There need NOT be more than one MALE member to form HUF.

5. If the family is reduced to Sole – Surviving coparcener with other family members, income tax is leviable on the joint family and not on male members as individual.

6. There can be a HUF comprising only of FEMALE members.

7. A member of the family can carry on any other business individually; it will be his individual income not of family even if he borrows requisite capital from the joint family fund.

8. Mostly fees or salary earned by Karta as director or partner may be considered as his individual income.

9. Salary income of the individual will not be assessed as income of the HUF merely by the reason that the person having been educated, maintained, supported wholly by joint family funds.

PLEASE NOTE THAT –Income Tax Act provides a special status to HUF under the Act and covers it in the definition of person u/s 2(31) of the Act. The Hindu Undivided Family (HUF) has not been defined under Income Tax Act, 1961, however, as per Hindu Law a Hindu Undivided Family (HUF) is ordinarily joint not only in estate but in food and worship.

As per Section 2(31) of Income Tax Act, 1961, unless the context otherwise requires, the term “person” includes:

(i) an individual,

(ii) a Hindu undivided family,

(iii) a company,

(iv) a firm,

(v) an association of persons or a body of individuals, whether incorporated or not,

(vi) a local authority, and

(vii) every artificial juridical person, not falling within any of the preceding sub-clauses.

Explanation: For the purposes of this clause, an association of persons or a body of individuals or a local authority or an artificial juridical person shall be deemed to be a person, whether or not such person or body or authority or juridical person was formed or established or incorporated with the object of deriving income, profits or gains.

From above discussion it is clear that a HUF is considered as a legal entity under provisions of Income Tax Act, 1961 same as an individual. The slab rates applicable to individuals is also applicable to a HUF. The HUFs can claim exemptions and deductions in various provisions of Income Tax Act, 1961 same as an individual. A HUF is eligible to claim deduction of interest on housing loan u/s. 24(b) also as well as payment of Capital u/s. 80C.



Similar to an Individual, HUF is eligible to invest in both movable as well as immovable assets. Thus, out of the income of an HUF, it can invest in both immovable properties such as land, building, house property, etc. Where an HUF makes an investment in a house property, the HUF can claim the benefit of NIL Annual value up to two such houses wherein no tax liability would be incurred.

However, any additional house property owned would be treated as ‘Deemed to be let out’ and subjected to tax.

HUF may also claim tax deduction for interest on house loan u/s 24(b) of the Income Tax Act, 1961 (hereinafter referred to as ‘the IT Act’) as well as principal payment u/s 80C of the IT Act.


An HUF may also invest in movable properties such as shares, bonds, mutual fund, NSCs, Kissan Vikas Patra etc. Such investments would also be separately eligible for tax benefits provided the same is covered within the ambit of the relevant provisions of the IT Act as HUF has a PAN separate from its members.

For instance, Investment in NSC, Equity Linked Savings Scheme (ELSS) – subject to 3 years lock in period, Fixed Deposits subject to 5 years lock in, etc. can be claimed as tax deduction by an HUF u/s 80C of the IT Act subject to the threshold limit of Rs 1.5 lakh.


Apart from the above, HUF can avail life insurance as well as health insurance policies on the life of its members and would be eligible for tax deduction provided the payment for the premium on such policies is made by the HUF and accordingly claim tax deduction u/s 80C and 80D of the IT Act respectively.


HUF can be dissolved by executing partition deed among all the members. The property of HUF should be divided equally amongst the HUF coparceners in accordance with the Hindu Succession Act.

In the context of an HUF, a coparcener is a person who acquires right in the ancestral property by birth. As such, coparceners have a right to demand partition in the HUF property and not other members. Earlier only male members up to three lineal descendants (e.g., son, son’s son and son’s grandson) were considered as coparceners.

However, post amendment of Hindu succession (amendment) Act, 2005 daughters can also be coparceners in the Father’s HUF and can demand partition.

It is pertinent to note that the Income tax Act, 1961 (hereinafter referred to as ‘the IT Act’ only recognises full partition and accordingly partial partition of the property would not dissolve the HUF as the Revenue authorities would continue to assess the income of such HUF and Income tax returns would be required to be filed mandatorily.

For the purpose of partition of HUF to be considered as valid, the HUF has to make an application or claim of partition having taken place among the members of such HUF before the Income Tax Assessing Officer (AO). The AO may on receipt of such application make an enquiry as necessary.

On Completion of inquiry, the AO shall make an order under section 171(3) of the Income Tax Act accepting or rejecting the claim of partition as also the date on which the partition has taken place.

It is notable that such an order is necessary, otherwise, the HUF shall continue to be assessed in the status of HUF by the income tax authorities.

Once the full partition of the HUF is carried out, the HUF can be closed and PAN of HUF should be surrendered to AO.

Tax savings through HUF

Pertinent Questions arises

1. What happens to a HUF if all but one member die? For example, in case a childless couple creates a HUF for tax saving purposes, what will happen to the HUF and the investments made through it, after the death of one of them?

An HUF can be formed by a married couple or members of a joint family. Thus, minimum two members are required to constitute a HUF and in case one of them dies, the sole surviving member can’t constitute a HUF.

The HUF property would be assessed in the hands of such sole surviving member in the absence of any other member or coparcener.

2. Will there be any difference in the procedure, in case of death of the Karta first and in the other case death of the other member first?

i) After the death of Karta- the next senior most member of the family automatically becomes the next Karta of the HUF. Any other coparcener can become Karta if the senior most coparcener gives up his right, with the consent of all coparceners.

ii) Procedure to be followed if Karta dies-

a) Since Karta has authority to operate the bank account of HUF, it is necessary to delegate the authority to new Karta in order to continue the operations.

b) Also, the Income tax authorities need to be intimated about the change in Karta.

c) The Bank and the Revenue authorities can be intimidated by submitting a declaration.

d) Certain other documents may be annexed to such declaration as required for instance, no objection letter to the bank by new Karta and all co-parceners, Copy of death certificate of Karta, etc.

iii) If any other member of the HUF dies, no specific procedures are required to be followed since the existence of HUF continues not affected by the death of a member.

CONCLUSION: HUF is one of the best tax saving modes. A HUFs is creation of customs and generally found in Hindus, Sikhs, Jains, Buddhists. A HUF, as such, can consist of a very large number of members including female members (w.e.f. 9th September, 2005, whether married or unmarried) as well as distant blood relatives in the male line. However, out of this, coparceners are only those males who are within 4 degrees in lineal descendent from the common male ancestor and including the common ancestor and the daughter of the common ancestor. A coparcener only has right to demand partition in the property of a HUF.

A HUF is considered as separate legal entity u/s. 2(31) of the IT Act,1961 and will be treated as such unless dissolved according to the provisions of IT Act, 1961. A HUF is assessed same as an individual and most of the exemptions and deductions available to individuals are also available to HUF.

DISCLAIMER the above article is only for sharing information and knowledge to the readers. The views expressed here are personal views of the author and same should not be considered as professional advice. In case of necessity do consult with tax professionals.


Author Bio

A Qualified Company Secretary, LLB , AIII , Bsc( Maths) BHU, Certification in Insurance Risk Management ( ICSI-III) have completed Limited Insolvency Examination and having more than 20 years of experience in the field of Secretarial Practice, Project Finance, Direct Taxes ,GST, Accounts & F View Full Profile

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One Comment

  1. ruch says:

    i have huf account and do share trading equity delivery and sell after 1 month. can huf give benefit above individual trading account. or is evrything same from tax perspective. pls explain. it looks same as 15% short term trading tax is applicable in both

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July 2024