Apr 012015

Creation Hindu undivided families – Part 1

Meaning of Hindu undivided families

Under the Income-tax Act, a Hindu undivided family (HUF) is treated as a separate entity for the purpose of assessment.

Benefit of treating separate entity:

  • HUF become separate natural person.
  • All benefits available to individual under income tax act are also available to HUFs, i.e., benefits of maximum amount not chargeable to tax of Rs 2,00,000, benefits of deduction u/s 80C etc,
  • Created from status.
  • All we need to do is to apply for new PAN card in the name of XXX (HUF).
  • HUF can earn all types of income except salary income.

The term “Hindu undivided family” has not been defined under the Income-tax Act. The expression is however, defined under the Hindu law as a family which consists of all persons lineally descended from a common ancestor and includes their wives and unmarried daughters.

The relation of a Hindu undivided family does not arise from a contract but arises from status.

Jain and Sikh families

Though Jain and Sikh families are not governed by the Hindu law, such families are treated as Hindu undivided families for the purpose of the Income-tax act.

This means like Hindu family, Jains and Sikhs can also form families and separate entity for taxation of income and may enjoy the benefits.


Hindu Coparcenary included those persons who acquire by birth an interest in joint family property. Previously, it was limited to male descendants only. With the introduction of Hindu Succession (Amendment) Act, 2005 from September 6, 2005, daughters also are given coparcener status.

Hindu Mitakshara Coparcener includes daughters of the Hindu Undivided Family in addition to sons, grand-sons and great-grand sons.

One of the important tests of coparcenary is that a coparcener enjoys the right to enforce partition.

Basic conditions of assessment

Income of a joint Hindu / Jain / Sikh family may be assessed as income of a Hindu undivided family if the following two conditions are satisfied:

  • There should be coparcenership. In this connection, it is worthwhile to mention that once a joint family income is assessed as that of Hindu undivided family, it continues to be assessed as such in subsequent assessment year till the partition is claimed by its coparceners.
  • There should be a joint family property which consists of ancestral property acquired with the aid of ancestral property and property transferred by its members.

Ancestral property

Ancestral property may be defined as the property which main inherits from any of his three immediate male ancestors, i.e., his father, grandfather and great-grandfather. Therefore, property inherited from any other relation is not treated as ancestral property.

Ancestral property may be defined as the property which a man inherits from any of his three immediate male ancestral property is taxable as income of Hindu undivided family.

Property obtained by daughter from the joint family property would be her absolute property. Any income therefrom is chargeable to tax in her hands in the individual’s status only. This will also apply to any legal heir obtaining property in the capacity of descendants.