Concept of Hindu Undivided Family (HUF)

In January, 2016, in a landmark judgement, the Delhi High Court has held that the eldest daughter can also be a ‘karta’ (manager) of the Hindu Undivided Family.

What is the Hindu Undivided Family (HUF)?

Hindu Undivided Family (HUF) concept is based on traditions and customs.  An HUF consists of all persons who are lineally descended from a common ancestor, including their wives and daughters. Sons-in-law and daughters-in-law are not part of the HUF, even though they are members of the ‘joint family’. This is the difference between an HUF and a ‘joint family’.

The concept of HUF comes under the Hindu Succession Act and it applies to all Hindu families. The concept even applies to Buddhists, Jains, and Sikhs, and to any person in India who is not Christian, Muslim,Parsi or Jew by religion. The members of Scheduled Tribes are exempted from the law.

Who is karta and who are coparceners of HUF?

An HUF consists of karta and coparceners. The karta is generally the eldest person or head of the family whereas all other family members are considered as coparceners. Children are also coparceners of their father’s HUF. When a woman gets married, she becomes a member of her husband’s HUF, while she continuing to be a coparcener of her father’s HUF. The karta manages day-to-day affairs of the HUF. As the “head of the family”, the karta can take decisions related to sell/buy/rent of the property. Even without the consent of the rest of the family, the karta can enter into contracts, compromises and can take loans on behalf of the family. However, this can be done only for the “good of the family”.

What are the provisions for an HUF under Income-tax Act, 1961?

Under Income-tax Act, 1961, an HUF is considered as a ‘person’ i.e. as a separate entity for the purpose of tax assessment. An HUF is taxed with same slab rates as applicable to an individual income tax assesse. An HUF obtains separate Permanent Account Number (PAN) in the name of the HUF. This will bring down the family’s tax liability as the income earned from assets and businesses owned by the HUF are assessed separately. However, once the family income is assessed as an HUF, it will be continued in subsequent assessment years as well till partition is claimed by the coparceners.

What are the provisions about inheritance in an HUF?

In an undivided family, the ancestral property hasn’t been partitioned among the sons and daughters. As per the Hindu Succession Act, all people who born in the family have the right to the HUF property. The Hindu Succession Act, 1956 included only the male members as coparceners. By an amendment to the act in 2005, daughters are also provided equal rights. Daughters become coparceners of their father’s families on birth same as sons, and have the same rights as sons in the family properties.

What is the Delhi High Court’s judgement?

In Delhi High Court, a suit was filed by Sujata Sharma, saying that as the eldest member of their generation, she would be the karta. The male members of the family not allowed her to become karta and said that the 2005 amendment didn’t automatically give her any right to manage the property as karta.

The Delhi High Court bench said that since the 2005 amendment had given equal rights to daughters to become coparceners then there is no reason why daughters should not be allowed to become karta. The court said that by virtue of being the first-born, the eldest daughter can become karta of an HUF.

While the judgement is welcomed, there are apprehensions that the kartaship to women may raise practical problems as women of most business families in the country rarely participate in the actual management of the business and property.