Nitiesh Bind
A Hindu Undivided Family (HUF), as its name suggests, is a joint family which is seen as a separate entity from that of the individual members in the HUF. The head of the family (i.e. father/ any elected person in case of the death of father) is called karta which operates the business of the HUF. Hindu, Buddhists, Jains, and Sikhs can form HUF. HUF usually has assets which come from a gift, a will, or ancestral property, or property acquired from the sale of joint family property or property contributed to the common pool by members of HUF.
HUF consist of co-parceners (who are family members) and the distant relatives, called members of HUF. Co-parceners are the family members and it consists of four levels of lineal descendants including the first male ancestor. It is only a co-parcener who can demand the partition of HUF.
Also read| CBDT allows taxman to widen certain ‘limited scrutiny’ cases; orders no roving enquiries
Members of HUF
Any other distant relative who is not a family member (e.g. brother-in-law, sister-in-law, etc.,) would be deemed member of HUF. Although they are members of HUF, they are not the co-parceners. A member cannot demand the partition of HUF. Under Hindu law, partition of HUF can be of two types: Total and partial partition.
Total Partition: It is a type of partition in which entire family property is divided among the co-parceners. After the total partition HUF ceases to exist.
Partial Partition: It is a type of partition in which some of the willing co-parceners get out of the HUF and rest of them continue the HUF. The partial partition may be property-specific when some of the properties are divided among the co-parceners and balance continue to be the property of the HUF. When a claim of total partition has been made by any co-parcener on behalf of HUF, the assessing officer shall inquire about it. For this, he shall serve a notice to all the co-parceners of the HUF and enquire whether the total partition has taken place and if yes, then on which date it is effected.
A HUF can be formed with just two members, one of whom is a co-parcener. But for an entity to be taxed as a HUF, it should have at least two co-parceners. For example, when any HUF consist of only husband and wife, then there is only one co-parcener (the wife is a member but not a co-parcener) and therefore, in such case income can’t be taxed in hands of HUF. It will be taxed in the hands of individual co-parceners. Unmarried daughters would always be a co-parcener and have the equal right over the property just like a son. The status of a married daughter in her father’s property is that of a co-parcener.
Since HUF is one person as per Income Tax Act, a proprietor of a business can be an individual or a HUF. A proprietorship concern is not governed by any specific law as such, and therefore there is no bar on HUF becoming a proprietor of any concern.
Source: Tax Guru
