REASON FOR CHOOSING THIS TOPIC :Taxation of HUF is not well defined by the Income Tax Law so we have

decided to work on this topic to give a clear picture about Taxation Of HUF. Our major source of information about HUF is taken from the Hindu Law as HUF is created by the Hindu Law.

Presented by:

INTRODUCTION ABOUT INCOME TAX

As per Section(4),income Tax is payable to Central Govt by every person on his total income earned in previous year at the rates applicable for the relevant assessment year.Person is defined under Sec2(31) as including1. 2. 3. 4. 5. 6. 7.

An individual Hindu Undivided Family(HUF) Company Firm Association Of Persons(AOP) OR Body Of Individuals(BOI) Local Authority Every artificial juridical person,not falling under any one of the preceding categories These can also be called as assesses. Our main focus will be on HUF.

HINDU UNDIVIDED FAMILY (HUF)

HUF is not defined properly in the Income Tax Act as it has been well defined in the Hindu Law. HUF consists of all males lineally descended from a common ancestor, their wives and unmarried daughters. A HUF is neither the creation of law nor of a contract and its membership arises from birth/ adoption/marriage. A Hindu is verily born into a HUF if he is a male, he continues to remain a member of HUF until there is partition of the family. Male members upto 4 generations including the head of family(Karta) are called co-parceners and have a right to partition in the joint co-parcenary property. For income tax purposes, HUF has a distinct assessable personality in comparison to its members and therefore share of profit or income derived by members from the HUF is exempt in their hands under section 10(2) as the HUF has paid the tax thereon.

Residental Status of HUF [Section 6(2)]

Resident if control or management is wholly or partly in India.

Not Resident if control or management is wholly outside India.

Before Taxation of HUF it is important to know the residental status of HUF.

A HUF is said to be resident family when its control and management are wholly or partly situated in India but if the control and management is done wholly outside India then HUF is not a resident family. Further Resident and Ordinarily Resident(ROR) and Resident and Not Ordinarily Resident(RNOR) depends upon the residental status of Karta.

Calculation of income-tax of HUF as per slab rates

Level of total income Where the total income does not exceed Rs.160000 Where the total income exceeds Rs.160000 but does not exceed Rs.500000 Where the total income exceeds Rs.500000 but does not exceed Rs.800000 Where the total income exceeds Rs.800000 Rate of income tax Nil 10% of the amount by which the total income exceeds Rs.160000 Rs.34000 plus 20% of the amount by which the total income exceeds Rs.500000 Rs.94000 plus 30% of the amount by which the total income exceeds Rs.800000

Calculation of net income tax payable by HUF

Basic Tax (+)Surcharge

As per slab rates Nil Amount as per slab rates 3% XXX

(+)education cess Tax payable

EDUCATION CESS
Education cess is an additional surcharge which is payable @ 2%. Education cess on income tax is for the purpose of providing universalised quality basic education. Education cess is payable by all assesses who are liable to pay income tax irrespective of their level of total income. Further 1% surcharge is applicable to fulfill the commitment of the Govt. to provide and finance secondary and higher education.

PARTITION.

TOTAL PARTITION.

PARTIAL PARTITION.

PARTIAL PARTITION

Partial partition means a partition, which is partial as regards members(i.e one or more co-parceners may separate from others and the remaining co-parceners may continue to be joint)or properties of HUF or both.

TOTAL PARTITION
Total Partition means that the entire joint family property is divided among all co-parceners and the family ceases to exist as an undivided family.

As per Sec 171 the income-tax law does not recognise any partial partition of HUF after 31/12/1978 and hence HUF will be assessed as if no partition had taken place and the members as well as the HUF will be personally liable for any tax; payable by HUF to the extent of property allotted to him. In case of total partition the assessing officer will make an inquiry into such partition and record the date of actual partition and shall assess the income only upto the date of partition and the members will be personally liable for any tax; payable by HUF to the extent of property allotted to him. If the partition has taken place at the end of previous year, the total income of the previous year shall be assessed as if no partition has taken place and the members will be personally liable for any tax; payable by HUF to the extent of the property allotted to him. During partition the following persons are entitled to share in assets of HUF:-1.All co-parceners2.A wife or mother has equal share to that of her sons3.A son in the womb of the mother at the time of partition.