HINDU UNDIVIDED FAMILY
This query is : Resolved
22 April 2008
PLEASE SUGGEST ME POCEDURE OF FORMATION OF HUF
22 April 2008
either throuh gift to family or tr. of encesteral property to the HUF.
22 April 2008
DEAR HARPALJI,
u hv to open a bank account and give a date of formation. this date can be ur marriage date of ur first son birth date, normally it is created out of funds recieved as gift from any relative, first deposit is by way of gift cheque, therefore account will be opened as zero balance account, all bankers are aware of this procedureapply pan number for HUF.
source:
http://finance.groups.yahoo.com/group/ICAI_CIRC_MEERUT_CA/message/24608
I REPRODUCE BELOW WHAT I HAVE REPLIED ON 11 TH APRIL - 08 ON HUF.HOPE THIS WILL BE USEFUL TO YOU.
Joint Hindu Family Firm -
This is a peculiar form of business found in India. In this form of business ownership, all members of a Hindu undivided family do business jointly under the control of the head of the family who is known as the 'Karta'. No registration is necessary for this form of business. Some kind of statutory control on the working of the HUF can be maintained by following the specific conditions, as laid down in the Income Tax Act. This is a peculiar business entity having its origin in personal law of the Hindus, and is peculiar to the Hindu Trading Community and their families.
The business of a HUF is managed by the senior most male member or father. He is known as the Karta, or Manager. As the head of the joint family, the Karta has full control over the affairs of the family business and serves as the custodian of the firm's assets. Other members of the HUF cannot question his judgement, if the Karta has acted in the name of the family and for its benefit. The only remedy available to them then is to demand partition of the ancestral property. Family business is considered a part and parcel of the ancestral property and, therefore the family business is the subject matter of co-parcenary interest. The rights and liabilities of co-parceners are determined by the general rules and traditional conventions of the Hindu Law.
source:www.insolvencyasia.com
It is rather obvious that a non-Hindu family cannot get this status. So, if you are a Parsi, Muslim or Christian, tough luck.
So, what is a HUF?
For starters, did you know the term 'Hindu Undivided Family' has not been defined under the Income Tax Act?
It is defined under the Hindu Law as a family that consists of all persons lineally descended from a common ancestor, including wives and unmarried daughters.
This means your membership into a HUF does not come from a contract but from your status.
A HUF cannot be formed by a group of people who do not constitute a family; lineal descendents with a common ancestor is a must.
In Maharashtra, unlike other states, even married daughters are recognised as HUF members.
Even though Jain and Sikh families are not governed by the Hindu law, they can still be treated as a HUF.
Who are the players in a HUF?
A HUF consists of:
Karta
The karta has to be the oldest male in the family. If he passes away, his wife cannot become the karta. His eldest son will take his place. If he chooses not to, he can give up his right and the next son in line can take his place.
Coparceners
This is what all the male members are referred to as.
A Hindu coparcenary includes the sons, grandsons and great-grandsons of the holder of the joint family property. By virtue of their birth, they acquire an interest in the property.
Members
The female members are simply called members.
Why is it important?
Under the Income Tax Act, a HUF is treated as a separate entity for the purpose of assessment. From this stems its importance.
However, the income of a joint Hindu family can be assessed as the income of a HUF Hindu only if the following two conditions are satisfied:
There should be a coparcenary.
There should be joint family ancestral property.
Other investments too can take place under the broad head of HUF.
For instance, a HUF can open a bank account in its name. The karta must open a HUF bank account in any bank by giving an undertaking on a stamp paper of Rs 100. The format will be supplied by the bank.
A demat account to buy shares can also be opened. Even post office deposits and a Public Provident Fund account can be opened in its name.
Tax benefits on education fees
Which income is regarded as HUF income?
There are five heads of income:
1. Salary
2. Profits from business or profession
3. Income from house property
4. Capital gains
5. Income from other sources
Since the HUF is a separate entity, it can earn income from all the above except income from salary.
All income that arises on the investment of the HUF's funds and utilisation of its assets is regarded as income and is separately assessed and taxed.
Will your gift be taxed?
How is it taxed ?
Though the HUF is taxed as separate entity, the tax slab which is applicable to an individual is applicable here too.
It also enjoys the Rs 1,00,000 deduction under Section 80C.
All the income tax slabs and deductions and exemptions available to individuals are also available to the HUF.
Let's take the case of Anil Shah.
He is a salaried individual but his family runs a business and owns a lot of property. Hence, they formed a HUF.
Anil will be individually taxed on his salary and all the tax breaks and deductions and exemptions will be applicable to him.
The HUF earns money from the business as well as rent from renting out the properties. The HUF will be taxed according to the various tax slabs and all the exemptions and deductions will also be available to it.
Let's say after paying the taxes, the HUF has a lot of profit. This profit can be divided to all the members and it will be totally tax-free in their hands since the tax has already been paid by the HUF.
2 home? Check the tax impact
Can it be partitioned?
Yes, the HUF can be partitioned.
This is actually a division of property where the share of each member is determined.
Only a male member -- a coparcener -- can enforce a partition. Female members cannot enforce a partition but are entitled to a share of the division (as per the Hindu law).
The shares are then divided between:
~ All coparceners
~ A son in the womb of his mother at the time of partition
~ Mother (gets an equal share if there is a partition between the sons and her husband has passed away)
~ Wife (gets a share equal to that of a son at the time of partition between father and sons)
If the karta passes away, the assessing income tax officer should be intimated of his death and the appointment of the new karta.
SOURCE: http://in.rediff.com/getahead/2006/apr/21huf.htm
R.V.RAO
DEAR HARPALJI,
u hv to open a bank account and give a date of formation. this date can be ur marriage date of ur first son birth date, normally it is created out of funds recieved as gift from any relative, first deposit is by way of gift cheque, therefore account will be opened as zero balance account, all bankers are aware of this procedureapply pan number for HUF.
source:
http://finance.groups.yahoo.com/group/ICAI_CIRC_MEERUT_CA/message/24608
I REPRODUCE BELOW WHAT I HAVE REPLIED ON 11 TH APRIL - 08 ON HUF.HOPE THIS WILL BE USEFUL TO YOU.
Joint Hindu Family Firm -
This is a peculiar form of business found in India. In this form of business ownership, all members of a Hindu undivided family do business jointly under the control of the head of the family who is known as the 'Karta'. No registration is necessary for this form of business. Some kind of statutory control on the working of the HUF can be maintained by following the specific conditions, as laid down in the Income Tax Act. This is a peculiar business entity having its origin in personal law of the Hindus, and is peculiar to the Hindu Trading Community and their families.
The business of a HUF is managed by the senior most male member or father. He is known as the Karta, or Manager. As the head of the joint family, the Karta has full control over the affairs of the family business and serves as the custodian of the firm's assets. Other members of the HUF cannot question his judgement, if the Karta has acted in the name of the family and for its benefit. The only remedy available to them then is to demand partition of the ancestral property. Family business is considered a part and parcel of the ancestral property and, therefore the family business is the subject matter of co-parcenary interest. The rights and liabilities of co-parceners are determined by the general rules and traditional conventions of the Hindu Law.
source:www.insolvencyasia.com
It is rather obvious that a non-Hindu family cannot get this status. So, if you are a Parsi, Muslim or Christian, tough luck.
So, what is a HUF?
For starters, did you know the term 'Hindu Undivided Family' has not been defined under the Income Tax Act?
It is defined under the Hindu Law as a family that consists of all persons lineally descended from a common ancestor, including wives and unmarried daughters.
This means your membership into a HUF does not come from a contract but from your status.
A HUF cannot be formed by a group of people who do not constitute a family; lineal descendents with a common ancestor is a must.
In Maharashtra, unlike other states, even married daughters are recognised as HUF members.
Even though Jain and Sikh families are not governed by the Hindu law, they can still be treated as a HUF.
Who are the players in a HUF?
A HUF consists of:
Karta
The karta has to be the oldest male in the family. If he passes away, his wife cannot become the karta. His eldest son will take his place. If he chooses not to, he can give up his right and the next son in line can take his place.
Coparceners
This is what all the male members are referred to as.
A Hindu coparcenary includes the sons, grandsons and great-grandsons of the holder of the joint family property. By virtue of their birth, they acquire an interest in the property.
Members
The female members are simply called members.
Why is it important?
Under the Income Tax Act, a HUF is treated as a separate entity for the purpose of assessment. From this stems its importance.
However, the income of a joint Hindu family can be assessed as the income of a HUF Hindu only if the following two conditions are satisfied:
There should be a coparcenary.
There should be joint family ancestral property.
Other investments too can take place under the broad head of HUF.
For instance, a HUF can open a bank account in its name. The karta must open a HUF bank account in any bank by giving an undertaking on a stamp paper of Rs 100. The format will be supplied by the bank.
A demat account to buy shares can also be opened. Even post office deposits and a Public Provident Fund account can be opened in its name.
Tax benefits on education fees
Which income is regarded as HUF income?
There are five heads of income:
1. Salary
2. Profits from business or profession
3. Income from house property
4. Capital gains
5. Income from other sources
Since the HUF is a separate entity, it can earn income from all the above except income from salary.
All income that arises on the investment of the HUF's funds and utilisation of its assets is regarded as income and is separately assessed and taxed.
Will your gift be taxed?
How is it taxed ?
Though the HUF is taxed as separate entity, the tax slab which is applicable to an individual is applicable here too.
It also enjoys the Rs 1,00,000 deduction under Section 80C.
All the income tax slabs and deductions and exemptions available to individuals are also available to the HUF.
Let's take the case of Anil Shah.
He is a salaried individual but his family runs a business and owns a lot of property. Hence, they formed a HUF.
Anil will be individually taxed on his salary and all the tax breaks and deductions and exemptions will be applicable to him.
The HUF earns money from the business as well as rent from renting out the properties. The HUF will be taxed according to the various tax slabs and all the exemptions and deductions will also be available to it.
Let's say after paying the taxes, the HUF has a lot of profit. This profit can be divided to all the members and it will be totally tax-free in their hands since the tax has already been paid by the HUF.
2 home? Check the tax impact
Can it be partitioned?
Yes, the HUF can be partitioned.
This is actually a division of property where the share of each member is determined.
Only a male member -- a coparcener -- can enforce a partition. Female members cannot enforce a partition but are entitled to a share of the division (as per the Hindu law).
The shares are then divided between:
~ All coparceners
~ A son in the womb of his mother at the time of partition
~ Mother (gets an equal share if there is a partition between the sons and her husband has passed away)
~ Wife (gets a share equal to that of a son at the time of partition between father and sons)
If the karta passes away, the assessing income tax officer should be intimated of his death and the appointment of the new karta.
SOURCE: http://in.rediff.com/getahead/2006/apr/21huf.htm
R.V.RAO
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