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What Is Hindu Undivided Family? HUF

by shagun Saini
What Is Hindu Undivided Family

A joint family enjoys tax benefits. Do you know What is Hindu undivided family? And how does HUF avail the benefit of tax? Here you will get to know What is Hindu undivided family? As well as Who is Karta in a Hindu undivided family (HUF)? Formation of Hindu undivided family (HUF), as well as what is Hindu undivided family in income tax? What Is Hindu Undivided Family in the business? What Is Hindu Undivided Family act? With an example of a Hindu undivided family. And notice some advantages as well as disadvantages of Hindu undivided family too. So, let’s start with What Is A Hindu Undivided Family?

What Is Hindu Undivided Family?

A Hindu undivided family consist of all persons directly descended from a common ancestor as well as the spouses and offspring of the male descendants. The HUF term commonly depicts a Hindu undivided family, which is basically a family of Hindus. Here, you can also include Buddhists, Jains, and Sikhs in this HUF term as they are also regarded as Hindus and can come together to form a Hindu undivided family (HUF).

For the purpose of saving tax, a HUF is created. Where, a Hindu undivided family (HUF) is treated as a person or single person under section 2 (31) ​ of the Income-tax Act, 1961, where HUF stands as a separate entity. The Hindu undivided family (HUF) needs to follow some rules and regulations. Where one of them is that HUF has its own Permanent Account Number (PAN) and also files tax returns of its independent members.

So, the Hindu undivided family definition can be stated as a family of Hindus. Where a Hindu undivided family (HUF) is treated as a person or single person.

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Who Is Karta In The Hindu Undivided Family (HUF)?

Here, the eldest member of the family is referred to as the Karta. Although the one who manages the affairs of the family or work of the family is regarded as Karta, he/she can also be the most senior member of the family. The junior member of the family can also be regarded as Karta and act as one with the consent of all the family members. As it was observed in the case of Narendra Kumar J. Modi vs. Seth Govindram Sugar Mills 57 I.T.R. P510 (SC).

Formation Of Hindu Undivided Family (HUF)

A single person cannot form a HUF, you need a joint family to form a Hindu undivided family (HUF). The family even may include two male members with their daughters too. So, you can note down the following points related to a Hindu undivided family (HUF):

  • You need a family to form a Hindu undivided family (HUF).
  • A Newly member automatically becomes a part of the Hindu undivided family (HUF).
  • Even Buddhists, Sikhs, and Jains can also form a Hindu undivided family (HUF).
  • It mainly includes ancestral property.

For the purpose of creating a Hindu undivided family (HUF), the bank account should also be created in the name of the Hindu undivided family (HUF) as well as tax will also be paid in the name of the Hindu undivided family (HUF).

What Is A Hindu Undivided Family In Income Tax?

Hindu undivided family in income tax is referred to as a single person. As for the purpose of saving tax, a HUF is created. Where, a Hindu undivided family (HUF) is treated as a person or single person under section 2 (31) ​ of the Income-tax Act, 1961, where HUF stands as a separate entity. The Hindu undivided family (HUF) needs to follow some rules and regulations. Where one of them is that HUF has its own Permanent Account Number (PAN) and also files tax returns of its independent members.

What Is A Hindu Undivided Family In The Business?

Hindu undivided family in business is referred to as a structure of business involving ancestral work or business, as the source of business is ancestral work. Here, the work is carried out by the senior-most member of the family referred to as Karta.

Although the one who manages the affairs of the family or work of the family is regarded as Karta, he/she can also be the most senior member of the family. The junior member of the family can also be regarded as Karta and act as one with the consent of all the family members. As was observed in the case of Narendra Kumar J. Modi vs. Seth Govindram Sugar Mills 57 I.T.R. P510 (SC).

What Is The Hindu Undivided Family Act?

A Hindu undivided family act is treated as a person or single person under section 2 (31) ​ of the Income-tax Act, 1961, where HUF stands as a separate entity. The Hindu undivided family (HUF) needs to follow some rules and regulations. Where one of them is that HUF has its own Permanent Account Number (PAN) and also files tax returns of its independent members. Further HUF is not created under any contract.

Hindu Undivided Family Example

Let us see an example of a Hindu undivided family

Example 1:Here is an example of KBC, who has started a HUF with a family comprising of his spouse and children.

  • Assumptions included in the KBC’s HUF:
  • Salary of $ 30 lakh
  • House Rent income as $ 10 lakh
Parameters KBC’s Income Before the formation of HUF ( $ ) KBC’s Income After formation of HUF ( $ ) HUF Income (Rs.)
Salary 30,00,000 30,00,000
Rent from House Property 10,00,000 10,00,000
Deduction on House Rent 3,00,000 3,00,000
House Rent Income 7,00,000 7,00,000
Income that is Taxable 37,00,000 30,00,000 7,00,000
Section 80C 1,50,000 1,50,000 1,50,000
Net Income that is Taxable 35,50,000 28,50,000 5,50,000
Tax that Must be Paid 9,12,600 6,94,200 23,400
Total Tax that must be paid by KBC (Inclusive of HUF)

A tax that is Saved due to the formation of HUF KBC

Rs.7,17,600
Rs.1,95,000

Hindu Undivided Family Advantages And Disadvantages

Let us find out some advantages and disadvantages of the Hindu undivided family (HUF).

Advantages Of Hindu Undivided Family (HUF)

There exist some advantages too of Hindu undivided family (HUF) which are as follows:

  • The head of the Hindu undivided family (HUF) has the authority to sign all the documents on behalf of all the other members of the family.
  • The tax benefit can be availed by the Hindu undivided family (HUF).
  • An adopted child can also become a part of the Hindu undivided family (HUF).

Disadvantages Of Hindu Undivided Family (HUF)

There exist some disadvantages too of Hindu undivided family (HUF) which are as follows:

  • The members of the HUF family have an equal right or say rights are equally distributed among all the family members. So, the consent of every member is important in all matters.
  • The dissolution of the Hindu undivided family (HUF) is possible only by a partition of its members.
  • A Hindu undivided family (HUF) needs to file tax unless dissolved.

What Is The Difference Between HUF And Individual?

An individual acts as a single person having his ancestral property or his own paying tax individually, whereas a Hindu undivided family (HUF) pays tax as a whole as it acts wholly on behalf of all the family members and has an ancestral property that is acquired by virtue.

FAQ

What Is The Meaning Of A Hindu Undivided Family?

A Hindu undivided family consist of all persons directly descended from a common ancestor as well as the spouses and offspring of the male descendants. The HUF term commonly depicts a Hindu undivided family, which is basically a family of Hindus. Here, you can also include Buddhists, Jains, and Sikhs in this HUF term as they are also regarded as Hindus and can come together to form a Hindu undivided family (HUF). So, the meaning of Hindu undivided family can be stated as a family of Hindus. Where a Hindu undivided family (HUF) is treated as a person or single person.

Who Comes Under The Hindu Undivided Family?

A Hindu undivided family consist of all persons directly descended from a common ancestor as well as the spouses and offspring of the male descendants. The HUF term commonly depicts a Hindu undivided family, which is basically a family of Hindus. Here, you can also include Buddhists, Jains, and Sikhs in this HUF term as they are also regarded as Hindus and can come together to form a Hindu undivided family (HUF).

What Is The Difference Between HUF And Individual?

An individual acts as a single person having his ancestral property or his own paying tax individually, whereas a Hindu undivided family (HUF) pays tax as a whole as it acts wholly on behalf of all the family members and has the ancestral property that is acquired by virtue.

How Do You Form HUF Hindu Undivided Family?

A single person cannot form a HUF, you need a joint family to form a Hindu undivided family (HUF). The family even may include two male members with their daughters too. So, you can note down the following points related to a Hindu undivided family (HUF):

  • You need a family to form a Hindu undivided family (HUF).
  • A Newly member automatically becomes a part of the Hindu undivided family (HUF).
  • Even Buddhists, Sikhs, and Jains can also form a Hindu undivided family (HUF).
  • It mainly includes ancestral property.
  • For the purpose of creating a Hindu undivided family (HUF), the bank account should also be created in the name of the Hindu undivided family (HUF) as well as tax will also be paid in the name of Hindu undivided family (HUF).

Conclusion

Thus, by now you know What Is Hindu Undivided Family? And how does HUF avail the benefit of tax? As well as Who is Karta in a Hindu undivided family (HUF)? Formation of Hindu undivided family (HUF), as well as what is Hindu undivided family in income tax? What Is Hindu Undivided Family in the business? What is the Hindu undivided family act? With an example of a Hindu undivided family. And notice some advantages as well as disadvantages of Hindu undivided family too. A Hindu undivided family consist of all persons directly descended from a common ancestor as well as the spouses and offspring of the male descendants.

The HUF term commonly depicts a Hindu undivided family, which is basically a family of Hindus. Here, you can also include Buddhists, Jains, and Sikhs in this HUF term as they are also regarded as Hindus and can come together to form a Hindu undivided family (HUF). Where, a Hindu undivided family (HUF) is treated as a person or single person under section 2 (31) ​ of the Income-tax Act, 1961, where HUF stands as a separate entity.

So, now we have understood What is Hindu undivided family?

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