New Delhi: A Hindu Undivided Family (HUF) is a legal entity under Hindu law that allows joint families to collectively own assets and manage finances. However, understanding how an HUF can acquire, hold, and transfer property is crucial for smooth tax and succession planning.
An HUF can exist even without owning assets, as long as it has two or more coparceners (family members with a birthright in the property). The Karta, or head of the family, manages all property transactions on behalf of the HUF.
When it comes to acquiring property, an HUF can receive gifts from non-members, provided the gift deed clearly states it is for the HUF. Members can also contribute their personal assets to the common HUF pool, though income from such assets may still be taxed in the original owner’s hands until distribution. Under Section 56(2) of the Income Tax Act, gifts from HUF members are not taxable, but gifts from non-members exceeding Rs 50,000 in a year are taxable in the HUF’s name.
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Regarding property transfer, a coparcener cannot gift away their share during their lifetime but may do so through a will. After the 2005 amendment to the Hindu Succession Act, both sons and daughters have equal coparcenary rights, and a deceased member’s share passes to their legal heirs if they die intestate.
On partition, Hindu law allows partial partitions, but for income tax purposes, only complete partitions—where all assets and members are divided—are recognised. Until then, the HUF continues to be taxed on its income.
In essence, managing property under an HUF offers tax advantages and ensures generational wealth continuity, but it requires careful compliance with succession and tax laws.
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