Income Tax--HUF

Dilemmas in HUF Taxation

V.K. Subramani

One of the prominent statuses of taxation is the taxation of Hindu Undivided Family (HUF). This status is peculiar to our country only and the Income-tax Act, 1961 deals fairly with the taxation of HUF. There is no similar status for income tax elsewhere in any other country and thus the status is unique to us only. This status is the outcome of our cultural practices for centuries and the social practices got codified and became law by way of Hindu law with various branches such as succession, adoption, marriage etc.,

Section 171 of the Income-tax Act, 1961 deals with assessment of HUF after its partition. HUF per se, means the ancestral property enjoyed by the descendants without partition. When the property is undivided and reaches the fourth generation i.e. great grandsons/great granddaughters without partition by the previous three generations, it obtains the character of HUF property. However, there are many other methods by which a HUF can come into existence such as by bequeathing the property by means of 'will' or gift. The further extension is gifting due to long acquaintance and declaring the gift to be enjoyed by the donee and his descendants jointly.