PRESENTATION ON HINDU UNDIVIDED FAMILY

1. PRESENTATION ON HINDU UNDIVIDED FAMILY ORGANISED BY CA BRANCH DEHRADUN ON DECEMBER 19, 2014 AT DEHRADUN ICAI BRANCH Presented by: CA Verendra Kalra

2. THE HINDU LAW • Acts Codified • Hindu law is basically derived from Srutis, Smritis, and customs. In post independent India, the following Acts have codified some of these aspects of the Hindu Law: • Hindu Marriage Act, 1955 • Hindu Succession Act, 1956 [ significantly amended by The Hindu Succession (Amendment) Act, 2005] • Hindu Minority and Guardianship Act, 1956 • Hindu Adoptions and Maintenance Act, 1956 • The Hindu Women’s Rights to Property Act, 1937 HINDU UNDIVIDED FAMILY

3. AN HUF • The Meaning • A joint Hindu family is a group of relatives tied together by ties of kinship & marriage and descended from a common ancestor. • HUF is automatically constituted on marriage • It includes children, children's children down the line, spouses. HUF is formed by the status of person in a family and not through any contract • Persons belonging to Jain, Sikh and Buddhist community can also constitute an HUF HINDU UNDIVIDED FAMILY

4. SCHOOL OF THOUGHT • Mitakshara School • The Mitakshara School exists throughout India except in the State of Bengal and Assam. • Mitakshara is applicable wherever Dayabhaga is silent. • The Inheritance is based on the principle of propinquity i.e. the nearest in blood relationship will get the property. • ‘Sa-pinda’ relationship is of blood. The right to Hindu joint family property is by birth. So, a son immediately after birth gets a right to the property. • Dayabhaga School • It exists in Bengal and Assam only. • Not being discussed being of lesser relevance. HINDU UNDIVIDED FAMILY

5. SCHOOL OF THOUGHT • Mitakshara School • The system of devolution of property is by survivorship ( subject to amendments in 2005 in Hindu Succession Act). • The share of coparcener in the joint family property is not definite or ascertainable, as their shares are fluctuating with births and deaths of the coparceners. • Coparcener has no absolute right to transfer his share in the family property, as his share is not definite. HINDU UNDIVIDED FAMILY

6. CORPUS OF AN HUF • Corpus Formation of an HUF • Once a member of an HUF receives any ancestral property from any ancestor three generations above him, an HUF’s corpus is automatically created. • Another way to form the corpus of an HUF is by receiving an asset or property by way of gift from a lineal ascendant/outsider with a specific instruction by the donor that the same is being gifted to the HUF. • Existence of nucleus or joint family property is not necessary to recognize the claim of status of an HUF. This may have relevance only from Income Tax point of view. • It has been established that since the HUF is a creature of Hindu Law, it can exist even without any nucleus or ancestral joint family property. HINDU UNDIVIDED FAMILY

7. KARTA • Who is a Karta • A joint family is headed by a Karta who is normally the eldest living male member of the family • He is the head of the Joint family • He acts on behalf of the joint family. • Karta has some peculiar rights and obligations under traditional Hindu Law, he has the power and duty of superintendence of how the joint family is run • The position of the Karta is "Sui generis". Sui generis in the sense that his position is not that of the Manager of a Commercial Firm and his relationship with the other members is not that of the Principal and Agent or Firm and Partners. HINDU UNDIVIDED FAMILY

8. KARTA • Who can be a Karta • If Karta passes away, the next heir in line can be Karta • Wife cannot become the Karta until there is a surviving son in the family. In case all the sons are minors, then the wife can be a Karta in a representative and Guardian Capacity. • After amendment in the Hindu Succession Act, daughter of a coparcener has equal right as of a son. Therefore, daughter being coparcener and can also be a “Karta”. • A minor male(coparcener) may also act as a Karta through his legal guardian till he becomes a major. • The right to be a Karta can be given up his right and the next son or daughter in line can take his place. • The Karta can function in dual capacity and can claim remuneration and other benefits as Manager from the HUF HINDU UNDIVIDED FAMILY

9. KARTA • The Power of Alienation • "Alienation" means "Transfer of Property from one person to another by way of a Sale, Gift, Lease or Mortgage. • The Karta can alienate the joint family property with or without the consent of the other coparceners. No consent is required in the following cases: • For the Purpose of Legal Necessity • For the benefit of the Estate and • For the performance of Indispensable Religious Duties • However such an alienation can be challenged by the continuing coparceners as not being for legal necessity or benefit of estate within 12 years of knowledge of transfer. HINDU UNDIVIDED FAMILY

10. KARTA • Other Powers • Managing the affairs of HUF • Control and become custodian of finances • Can borrow money for & on behalf of HUF • Spend money for the family & not accountable for it. • Not liable to submit account to anyone. • Can make partition of the family suomoto. • He can enter into contracts on behalf of HUF and may allow others to represent HUF • Can Gift away the movable properties of HUF for natural love & affection but within reasonable limit. • Can transfer the immoveable property for pious purposes or the legal necessity or for benefit of the family. HINDU UNDIVIDED FAMILY

11. KARTA • Spending Powers • The Karta has no special interest therein. • The right of a son or nephew in the income is not a right to an exact fraction of the income. • The Karta may well spend more on a son whose family is large or who has special aptitude or necessity. • [CIT v. Devan Krishna Kishore 9 ITR 695 (PC)] HINDU UNDIVIDED FAMILY

12. COPARCENERS • Coparceners • Within the joint family there is a narrower body called the Coparcenary. • Coparcenary is restricted to four levels of living order, i.e. consisting of four successive generations including the last male holder of the property. • This includes the eldest male member + 3 generations. • This special group of people are called coparceners and have a definitive right in ancestral property right since the moment of their conception. • Hindu coparcenaries includes the sons-daughters, grandsons-granddaughters and great-grandsons-great grand daughters of the holder of the joint family property. By virtue of their birth, they acquire an interest in the property. HINDU UNDIVIDED FAMILY

13. CONCEPT OF COPARCENERS • As long as A is alive, Coparcenary consists of A, B1, B2, B3, C1, C2, C3, C4, D1, D2, D3, D4. The descendents in the fifth degree E1, E2, E3 and E4 are members but not coparceners in the HUF • On A’s Death, the Coparcenary will then include E1, E2, E3 and E4, now being in the fourth degree of descent from the Senior Coparcener • Even if B1, B2 or B3 in the second degree, predecease A, E1, E2 and E3 do not become coparceners, as they still constitute the Fifth Degree in lineage. HINDU UNDIVIDED FAMILY

14. FOUR DEGREES OF COPARCENERS • As observed in the Concept of Coparceners in the previous slide, on death of the common male ancestor, males of another generation will be added to the Coparcenary i.e. the Coparcenary after his death will consist of his sons, his grandsons and his great grandsons. • After the death of the common ancestor, the Coparcenary may consist of collateral brothers and their progeny in the male line up to descendants of the fourth degree including the brothers. • Coparcenary is not restricted to four degrees from the Common ancestor but to four degrees from the living holder of the HUF Property, i.e. the senior most living coparcener of the family. HINDU UNDIVIDED FAMILY

15. BIG & SMALL HUFs • The HUF consisting of all the persons in the Chart alongside namely, the coparceners A, B1, B2, B3, C1, C2, C3, C4, D1, D2, D3, D4 and the members E1, E2, E3 and E4 constitutes the bigger HUF. • A smaller HUF would consist of B, C1, C2, D1, D2, E1 and E2. • Gift of property from Bigger HUF to Smaller HUF is feasible and will form property of smaller HUF and only distribution of property thus takes place and not partition. Section 64(2) is not applicable in this case. HINDU UNDIVIDED FAMILY

16. MEMBERS v. COPARCENERS • Who can be Coparcener • The system of Coparcenary is a narrower institution • This group of persons, unlike the joint family, is related to each other only by blood or through a valid adoption. • While there may be many members of an HUF, only a few of the members may be Coparceners of the HUF. • All coparceners are members of HUF, all members are not coparceners. The following persons cannot be coparceners: • The Husband’s wife • Father’s wife and lineal descendant’s wives • Illegitimate sons and daughters • An insane member of the family • Member who renounces his religion • A minor coparcener, if given in adoption HINDU UNDIVIDED FAMILY

17. DAUGHTERS AS COPARCENERS • On 9th September 2005, the Hindu Succession Act, 1956 was amended to provide that a daughter too could be a coparcener i.e. joint heir, like her brother to the joint family's assets and she too could enforce the partition of the family property to claim her individual share. She continues to be the coparcener in her father's HUF even after she gets married and forms another HUF with her husband. Now, • Daughter of a coparcener shall by birth become coparcener in her own right in the same manner as son. • Daughter has the same rights in the coparcener property as she would have had if she had been a son. • Daughter is allotted the same share as to the son. • Married women have rights in two HUFs-their father's as coparcener and their husband's as member. HINDU UNDIVIDED FAMILY

18. INTEREST OF COPARCENERS • Extent & Transferability of Interest of Coparceners • A Coparcener has a right over the property of the family in the case of Partition of the HUF • A coparcener's interest is not fixed & it fluctuates by birth and deaths in the family • A coparcener can sell or gift away his interest to another coparcener or even a third party, without the consent of other coparceners. • A third parties’ right to take possession of property along with rest of Coparcenary is limited. The family can buy the third party out in order to maintain integrity of the house and to prevent a stranger from getting in with the family. This right is given by Transfer of Property Act as well as the Partition Act. HINDU UNDIVIDED FAMILY

19. RIGHTS OF COPARCENERS • Extensive Rights to Coparceners • Any coparcener can at anytime seek a partition of his share. • The continuing coparceners can seek to buy out the share of coparcener expressing his intention to move out by exercising the right of ‘pre-emption’. HINDU UNDIVIDED FAMILY

20. LIABILITY OF COPARCENERS • Privileges not without liability • It is generally presumed that money required for carrying on family business is a family necessity and that the business is carried on with the consent or acquiescence of all the members of the family. • Thus, if debts are incurred by the Manager in the ordinary course of the family business, all the Coparceners become liable. However, their liability is limited to the extent of their interest in the family property and not beyond that. • In case of an act contrary to the interest of the HUF is done by the Karta, the adult coparceners become personally liable if they themselves are actually contracting parties along with the Karta, or if they ratify the contract entered into by the Karta HINDU UNDIVIDED FAMILY

21. MINOR AS COPARCENERS • Can a Minor be a Coparcener? • Yes, a minor can be a Coparcener. • The moment a male child takes birth in the joint Hindu family, he gets the birth right in the Coparcenary property. • Hindu law makes no sort of distinction between major and minor coparceners in respect of their rights in the joint family estate – However, the same is a debatable issue in view of the demerits of a Minor Coparcener discussed later • A minor coparcener is not a major coparcener until he attains the age of 18 years. • A minor coparcener, who does not become personally liable for any debt or contract unless the same is ratified by him after attaining majority HINDU UNDIVIDED FAMILY

22. MINOR AS COPARCENERS • Minor Coparcener-Demerits • Whereas a major coparcener can effect a severance or partition at his will, the minor coparcener cannot of his own will cause himself to be separated nor can he authorize anyone on his behalf to separate him. • He can institute a suit for partition through a next friend in a court of law. The court will take cognizance of the situation and would enforce partition only when it is satisfied that the partition would be beneficial to or promote the interests of the minor. • A minor after becoming of age can reopen the partition if he can prove that the partition was not for his benefit or it was unfair with regard to him. HINDU UNDIVIDED FAMILY

23. MEMBERS • Rights of Members • The wife of a coparcener cannot force a claim for partition. • The members of the HUF which include male and female members, daughters and children of the male members are entitled to maintenance. • Maintenance includes food, shelter, clothing, education, medical aid and marriage. • A members of the HUF is entitled to own and possess his separate property besides his interest in the HUF property. • The widow and children of a deceased coparcener have the right to be maintained out of the HUF property. HINDU UNDIVIDED FAMILY

24. ANCESTRAL PROPERTY • As per Hindu law, ancestral property means property acquired by forefathers. Therefore, any property which is received by the coparcener on partition is always considered as ancestral property. • However, it is to be noted that if the coparcener is unmarried on the date of partition then income from such property would be assessed in his hands in individual capacity till he gets married, reason being that single person cannot constitute family. Till he gets married, he is the absolute owner and can dispose it in any manner he likes. Therefore, in the absence of family, the income from such property is liable to be assessed in individual capacity. • (C Krishna Prasad-CIT 97 ITR 343 SC.) HINDU UNDIVIDED FAMILY

25. COPARCENARY PROPERTY • Coparcenary property is wider than the expression ‘ancestral Property’. It would include the following: • Ancestral property i.e. the property inherited from father, grandfather or great grandfather; share allotted on partition; • Property acquired by the coparceners with joint efforts. In Madanlal v. Yogabai AIR 2003 SC 1880, it has been held that property raised and developed by joint efforts of father and sons would be joint family property; • Property acquired with the aid of or on account of coparcenary property. • Property of the coparcener thrown into common hotchpots of family funds. • The property received by HUF having ancestral property as gift or under a will. Intention of the donor is relevant while considering the character of the gifted property. • (M.P.PeriakaruppanChettiar-vs-CIT 99 ITR 1 SC.) HINDU UNDIVIDED FAMILY

26. HUF PROPERTY • Whether property inherited from father can be treated as HUF property? • As per the old Hindu law, the property inherited by a coparcener was considered as ancestral property. • But after the amendment in 2005 in Hindu Succession Act, the property of father devolves by testamentary or intestate succession and not by survivorship. The father has absolute right over the property acquired by him on account of personal efforts or through borrowed funds. He can dispose of such property as he wishes. Hence, property inherited from father cannot be treated as ancestral property. • [CWT-vs-ChanderSen 161 ITR 370 SC)] HINDU UNDIVIDED FAMILY

27. PRPERTY INHERITED BY SON • The son inherits the individual property of his father as an individual under the Hindu Succession Act and not in the status of HUF • Property devolving under section 8 of the Hindu Succession Act on the legal heirs should be treated as individual property and the income arising from the said property should be assessed in the status of an individual. • [CIT v. A.P.S. ParameshwaranPillai(2000) 241 ITR 748 (Mad)] • In PrabhashchandraJha v. CWT (2007) 291 ITR 335 (MP) it was held that since the property inherited by the assessee as an individual from his individual father was not thrown into the common stock of the family before 31-12-1969, it was taxable as a separate property and not as property of the HUF. HINDU UNDIVIDED FAMILY

28. SURVIVORSHIP • Post the recent amendment in Hindu succession Act in 2005, Under Section 6(3) and Explanation to section 6(3) on the death of a Hindu his interest in family property shall devolve by succession and not by survivorship. • The succession can be testamentary (by will) or intestate (without a will) • Therefore the coparcener may make a will bequeathing his interest in the HUF property to any person, a coparcener or a member. • If he does not leave a will, the intestate succession will be as per the rules of succession as laid does in section 8 for males and general rules of succession under section 15 for females • The Interest of a deceased which was there in the original explanation to Section 6 provides that shares would be allocated as if a notional partition had taken place before his death. • This would apply also to the death of a coparcener like wife who was not entitled to claim partition in her own right. HINDU UNDIVIDED FAMILY

29. HUF PROPERTY • The expression Joint family/HUF property is still wider–A property may not be either ancestral or Coparcenary property yet may be considered as HUF property in certain cases. • There may be a family with a single male member without having ancestral/Coparcenary property. Such family may receive gift from relatives or friends of members of family. • Further, the single male member of such family may blend his self acquired property into joint family property. Such property would neither be ancestral nor Coparcenary property but certainly be HUF property. • To buttress this view, reference may be made to the decision of the apex court in the case of SurjitLalChhabra 101 ITR 776 SC. However, in such case, it was held that income from such property would be assessable as personal income of the male person till the birth of a son. HINDU UNDIVIDED FAMILY

30. CREATION OF PROPERTY • How an HUF can create property? • Properties of HUF can be acquired by joint labour. • Vesting of self acquired property in family hotchpotch can create family nucleus. Clubbing provision u/s 64(2) to be noted. • A newly created HUF as a unit may receive gifts from outsiders or from father or brother or sister of the kartawho are not members of the donee HUF. All such gifts will result in accretion to the family fund without attracting the provisions of Section 64(2). • A father can gift his self acquired property to his sons’snewly created HUF. It is essential that the gift deed should specifically mention the gift to the HUF & not to individual son. • HUF through will: A new family nucleus can also be created by a will but the intention of the bequest being for the family has to be made absolutely clear in the will. HINDU UNDIVIDED FAMILY

31. CONSTITUENTS OF AN HUF • Can Single Unmarried Person form an HUF? • No, a single unmarried person cannot constitute an HUF • Can there be an all-Female HUF? • Yes, in view of the decided case laws, an all-female HUF has been given due recognition in the eyes of the law. • Can a female be a Karta? • Yes, after amendment in the Hindu Succession Act, daughter of a coparcener has equal right as of a son. Therefore, daughter being coparcener and can also be a “Karta”. HINDU UNDIVIDED FAMILY

32. CONSTITUENTS OF AN HUF • Son is not necessary to constitute HUF under Mitakshara law • - GowaliBuddanna v. CIT (1966) 60 ITR 293 (SC). • HUF can be formed with one husband and wife only • - Prem Kumar v. CIT 121 ITR 347 (Allahabad H.C.). • Remuneration to Karta of HUF can be followed • - J. K. BaldeoSahai v. CIT 63 ITR 238 (SC). • The term HUF is much wider than Hindu Coparcenary. The Direct Tax Laws deal with the HUF and not with the Hindu Coparcenary. It is not correct to say that no female can be a member of HUF and an HUF does not necessarily consist of only male members • - KalyaniVithaldas v. CIT 5 ITR 90 (PC) HINDU UNDIVIDED FAMILY

33. HUF BY A WIDOW Can the widow succeed to estate of husband? A Hindu widow by virtue of section 14 of the Hindu Succession Act, 1956 may become a fresh stock of descent, but as she has become full owner of her husband's properties, her children, if any, by her first husband, her adopted son if she cares to adopt and her children if she gets married again, will all be her heirs an in that sense, she and her children may form one joint family but non of them can have any right by birth in her property, and hence the Hindu joint family as ordinarily understood in Hindu Law cannot be brought into existence. [RukmaniBaiRathor v. CWT 54 itr 430] HINDU UNDIVIDED FAMILY

34. HUF BY A WIDOW Can HUF continue by adoption by a widow? Held, yes. “The facts in the present case is brought out earlier go to show that the Karta had died leaving his widow and she had adopted the assessee and by virtue of the adoption by a Hindu, the adopted son is treated as adopted by the deceased father too and thereby he acquires the Coparcenary rights in the HUF property as if it existed all the time. The fact that at the time of adoption the spouse of the widow was not alive in accordance with the above decisions does not alter his rights as a coparcener” [ITO v. R.N. Dalichand Jain 2002 80 ITR 474 Bang] HINDU UNDIVIDED FAMILY

35. BUSINESS ASPECTS • Interest paid by HUF to Coparceners • The ruling came from the Hon’ble Supreme Court of India in the case of CIT v. VenugopalInani (1999) wherein the Interest paid on amounts lent by them to the HUF was held not deductible as a business expenditure u/s 37(1) • Income earned with aid of HUF funds • The same is assessable in the hands of the HUF when funds of family have been invested in business HINDU UNDIVIDED FAMILY

36. BUSINESS ASPECTS • Loan from HUF • Taking a loan from an HUF for personal use does not amount to use of family funds. • The income from utilization of such loan funds is assessable in the hands of the Individual Member of the HUF • Can there be a Partnership between the Karta and the Karta as representative of the HUF? • As a settled law, there cannot be a partnership between a coparcener as individual and the same coparcener in representative capacity for the HUF • If there is at least one more partner, then in the partnership the same person can represent the HUF and also himself as the individual HINDU UNDIVIDED FAMILY

37. BUSINESS ASPECTS • HUF as Partner of Firm • Under sec. 2(31) of the IT Act, 1961, a HUF is a ‘person’ for the purpose of the Income-tax Act • However, a HUF is not a juristic person for all purposes (viz., for the purposes of other laws) including the partnership law. • Accordingly, under the Indian Partnership Act, 1932, a HUF is not a juristic person and it cannot enter into a valid partnership with any other person. • The Karta of the HUF may enter into partnership with outsiders on behalf and for the benefit of his joint family. • It is competent to the manager or Karta acting on behalf of the HUF to enter into a valid partnership with a stranger or with the Karta of another family HINDU UNDIVIDED FAMILY

38. RESIDENTIAL STATUS OF AN HUF If A & B Satisfied- OR If none satisfied - NOR HINDU UNDIVIDED FAMILY

39. TAX BENEFITS OF AN HUF TAX SAVINGS – A DEMONSTRATION By setting up an HUF an individual can divide his taxable income between two separate income tax entities, this decreases his net taxable income as HUF gets 80C, 80CCF, 80D deduction separately and the basic exemption and cuts his annual tax payment by Rs. 1,47,290/- HINDU UNDIVIDED FAMILY

40. ASPECTS OF TAXATION • Remuneration paid to Karta • The admissibility or otherwise of the remuneration paid to the Karta/member of the family for running the affairs of the HUF depends on the facts of the case. • The amount paid would be a justified deduction if it is for specific services rendered • It should be bona fide and in the interest of the business of the family. Further, the payment should be genuine. • The courts have held that before a Karta is paid remuneration, there should be a valid agreement. • It is to be noted, that where salary is allowed as a deduction in the hands of the HUF, it would become individual income of the Karta. Recourse to section 10(2) is unavailable in this regard. HINDU UNDIVIDED FAMILY

41. ASPECTS OF TAXATION • However, the income of a joint Hindu family can be assessed as the income of a HUF, only if the following two conditions are satisfied: • There should be a Coparcenary. • There should be joint family ancestral property. • Five basic heads of income -Salary, House Property, Capital Gains, Profit from business, and Income from other sources. Except for salary, HUF can earn from all of these sources. HINDU UNDIVIDED FAMILY

42. TAX BENEFITS OF AN HUF • ASPECTS OF TAXATION • A Karta can file three Types of Returns • In his individual capacity; • In the capacity of Karta of the HUF which had come into existence after partition of his father’s HUF. • In the capacity of Karta of his own HUF. • Though the HUF is taxed as separate entity, the tax slab which is applicable to an individual is applicable here too. • Provisions of section 56(2)(vi) applicable even to HUF if any sum of money is received by the HUF exceeding Rs. 50,000 p.a. from non members. • Items received in kind subjected to the provisions of sec. 56(2)(vi). HINDU UNDIVIDED FAMILY

43. TAX BENEFITS OF AN HUF • STOCK MARKET AND MUTUAL FUNDS • HUF can have a separate Demat Account. • It can invest in the shares of the Companies in:- • (a) The Primary Market • (b) The Secondary Market • Enjoy Tax Free Income for Long-term Capital Gains by holding shares for more than one year (STT Paid). • HUF has 2 benefits in investing in IPOs’ i.e. the 2 lakhs limit for the investment to be categorized as retail is not breached and there is a greater probability of more shares being allotted. • Enjoy lower tax rate of 15% on Short-term Capital Gains(STT Paid). HINDU UNDIVIDED FAMILY

44. TAX BENEFITS OF AN HUF • TAX STRATEGIES • Distribution of Income to Coparceners : • Karta can gift money to the coparceners from the income earned by the HUF. This income is tax-free in the hands of the coparceners u/s 10(2). This way, person with a high income will be able to get tax-free income. • Funding for Loans : • HUF can give loans to the Karta or coparceners for setting up business & can charge interest on the loan. Interest paid on any business loan is fully deductible. HINDU UNDIVIDED FAMILY

45. TAX BENEFITS OF AN HUF • TAX STRATEGIES • Helps in tax planning for service tax : • If business turnover is split by setting up HUF, the service provider can avoid the hassle of charging service tax and become small scale service provider. • Salary to Karta is deductible : • This salary is taxed as income in hands of the Karta and will be fully deductible from the HUF income. • Use of income from HUF for expenses : • The income earned by the HUF can be used for the household expenses of the family. HINDU UNDIVIDED FAMILY

46. INCOMES EXEMPT • Section 10(2) – Sums received by members exempt • This section provides that no liability to Income Tax shall be attracted or imposed on any member of an HUF in respect of any sum received by him as member and paid out of the income of the family. • 10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included— • ….. • any sum received by an individual as  a member of a Hindu undivided family, where  such sum has been paid out of the income of the  family, or, in the case of any impartible estate, where such sum has been paid out of the income of the estate belonging to the family; ….. HINDU UNDIVIDED FAMILY

47. GIFT TO AN HUF BY MEMBER • The provisions of Section 56 of the Income Tax Act are reproduced as under: • Therefore, gift to an HUF by member is exempt “56 (vii) where an individual or a Hindu undivided family receives, in any previous year, from any person or persons on or after the 1st day of October, 2009,—(a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum;(b) any immovable property ….. (c) any property, other than immovable property ….. … Provided that this clause shall not apply to any sum of money received— (a) from any relative; … Explanation.—For the purposes of this clause,— (e) “relative” means,— … (ii) in case of a Hindu undivided family, any member thereof;” HINDU UNDIVIDED FAMILY

48. GIFT TO AN HUF BY OTHERS • As per the applicability of provisions of section 56 of the Income Tax Act, 1961, the gift received by an HUF from a stranger is taxable. • As per the provisions of Section 56 of the Income Tax Act, 1961, if aggregate amount received during the year is more than Rs. 50,000/- the same will be chargeable to tax • There is no restriction for a HUF to accept gifts from any source. • However, the intention of the donor should be clear and the gift should be genuine. • Gift declaration detailing complete information relating to the donor should be drawn and recorded. • Gift by cheque should go in a bank account in the name of the donee HUF for realization and subsequent realization. HINDU UNDIVIDED FAMILY

49. IMPLICATIONS IN INCOME TAX • On the combined reading of Section 56(2) and Section 10(2) and literally interpreting the provisions of the Act and specific amendments thereto, following scenario emerges: • Any sum given by HUF to its members, subject to the conditions prescribed under Section 10(2) is exempt from tax in the hands of recipients. • Gift received by HUF from its members would be excluded from taxable income HINDU UNDIVIDED FAMILY

50. GIFTS-ISSUES • Can an HUF give away its property by way of gift? • Although children acquire by birth rights equal to those of a father (Karta) in an ancestral property, both movable and immovable, the father has the power of making, within reasonable limits, gifts of ancestral movable property without the consent of coparceners. • Combined reading of the Hindu Law and various judicial precedents show that whereas, the Karta has the power to gift ancestral movables within reasonable limits, he has restricted power with regard to ancestral immovable property.  • He can however, make a gift within reasonable limits of ancestral immovable property for “pious purpose”. However, the alienation must be by an act inter vivos, and not by will. • [Kuppayee vs. Raja Gounder (265 ITR 551 at 559) SC] HINDU UNDIVIDED FAMILY