This will help students to learn more about assessment procedure of HUF

1. MAHESH M.T
ASST. PROFESSOR OF COMMERCE

2.  Relation of partnership arises from an agreement, while the
relation of a Hindu undivided family arises from status.
 The Hindu undivided family is assessed to income tax as a
separate independent unit.
 The Income Tax Act has not defined the meaning of a H.U. Hence,
we have to depend for this purpose on the definition given under
the Hindu Law.
 According to Hindu Law, a Hindu undivided family consists of all
male persons lineally descended from a common ancestor (except
those who have separated from the joint family by the partition of
assets) and includes their wives and unmarried daughters, and also
a stranger who has been adopted by the family.

3.  Mitakshara School: It applies to the whole of India except the
State of West Bengal, Assam and some parts of Orissa.
 According to this school, the son acquires an interest in his fathers
ancestral property by mere birth and has a right to demand partition.
But the self-acquired the father remains his personal property and
the income from self-acquired property of the father is to be assessed
as the income of an individual even after the birth of the son.
 In any case, the father has a right to impress his self-acquired
property with the character of Joint Family property. Such
conversion of the separate self-acquired property into joint family
property can be effected merely by a clear expression of intention,
ie, by conduct and does not require any formalities, like a registered
document, to be complied with.

4.  Dayabhaga School: It applies only in West Bengal,
Assam and some parts of Orissa.
 According to this school of law, the son gets a right
in the ancestral property only after the death of the
father. During his life-time father has got an absolute
right to sell, donate or transfer the ancestral property,
in any manner he likes.

5.  A Hindu Undivided Family consists of two types of members :
 (a) Members who are entitled to maintenance only, e.g., female
members of the family.
 (b) Members who are entitled to demand their share on a partition
of the family. persons are called co-parceners. These were the sons,
grandsons and great-grandsons of the holders of the property for
the time being.
 However, after the commencement of Hindu Succession
(Amendment) Act, 2005 (w.e.f. 9.9.2005), in a joint Hindu family
governed by the Mitakshara Law, the position of a daughter has
become as under:
 1. The daughter of a coparcener shall by birth become a coparcener
in her own right in the same manner as the son.
 2. She will have the same rights and liabilities in respect of
coparcenary property as that of a son.
 3. The female heir can demand the partition of a coparcenary
property in the same manner

6.  For income tax purposes a Hindu undivided family is one
which has the common property of the family and at least
two members.
 (1) Common property of the family.
 The common property of a Hindu Undivided Family
consists of the following
 (a) Ancestral property; and/or
 (b) Any other property of the family acquired with the aid
of ancestral property; and/or
 (c) Any property acquired by a member of the family by his
personal efforts without the aid of ancestral property,
but treated by him as the property of the Family.
 (2) H.U.F may consist of
 (a) All persons lineally descended from a common
ancestor and include their wives and unmarried daughters;
 b) A male and widow or widows of a deceased male
member or members;
 (c) Husband and Wife (d) brothers (e)widows

7.  Karta of the Family
 The senior most male member of the family is
ordinarily regarded as the Karta.
 If he surrenders his right of management, a
junior male member may be appointed as
Karta, if there is no male member in the
family or the male member is not competent
to contract senior most female member will
be regarded as Karta of the family.

8.  RESIDENT IN INDIA
 A Hindu Undivided Family is resident in India if the
control and management of its affairs are situated
wholly or partly in India.
 NON-RESIDENT
 It is only when the control and management are
situated wholly outside India that a Hindu
undivided family are regarded as non-resident.
The control and management of a business are
situated at the place where 'the head and brain of
the trading adventure' is situated; and the place of
control may be different from the place where the
operations of the business are conducted.

9. NOT ORDINARILY RESIDENT
A Hindu undivided family is said to be 'not ordinarily
resident' in India in any previous year if:
1) the manager of the family has been a non-resident in
India in 9 out of 10 previous years preceding that
previous year; or
2) ii) the manager of the family has been in India for a
period amounting in all to 729 days or less during the 7
previous years preceding that previous year.
3) in this connection, it is the manager's residence in India
that is to be considered and not his residence outside
India.
4) From the foregoing provisions, it is clear that a Hindu
undivided family shall be not ordinarily resident', if its
manager is 'not ordinarily resident in India. In other
words, it means that a H.U.F. is an ordinary resident in
India during any previous year if its Karta is ordinarily
resident.

10. Sl
no
HUF FIRM
1. Members of the H.U.F. are called
coparceners
Members of firm are called
partners.
2. Governed by Hindu Law Governed by Partnership Act.
3. member of H.U.F. continues to be
its member even after becoming
insolvent.
If a partner is adjudicated an
insolvent, he ceases to be the
partner of the firm
4. the death of a member of H.U.F.
does not affect its continuance.
A firm is dissolved after the death
of a partner,
5. the members of the family do not
have the right to inspect the books
of account and other documents.
Partners have a right to inspect the
books of account and other
documents of the firm,

11. Sl
no
HUF FIRM
6. The consent of other members of
the family is not required in the
case of any new entrant in the
family, but he/she gets
membership automatically by birth
Without the consent of all other
partners, a new partner cannot be
admitted in the firm
7. The ratio of profit of each member
in the family depends upon the
new births and deaths and is
determined under the Hindu Law.
Profit sharing ratio in the firm is
agreed upon in the partnership deed
and can be altered only by the
change in the deed,
8. in the family there is no such
restriction of number of members.
In a firm, there cannot be more than
50 members,
9. The liability of the members of the
H.U.F. is limited to the extent of
the assets acquired by the family.
The liability of the partners is
unlimited

12.  (1) The personal earnings including income from the separate
property of a member of the Hindu undivided family, even
though he has sons shall be assessed as the income of an
individual.
 (2) Income from the self-acquired property of a father is
assessable as the income of an individual. If the father makes a
personal gift of his self-acquired property to his major son, the
income from such property shall be assessed as the personal
income of the son like an individual. If the son gets his father's
self-acquired property as an ancestral property, the income
from it may be assessed as the income of the family.
 (3)After the death of her husband, if the wife is the sole owner
of the property of the family, she will be assessed as an
individual in respect of income from such property.
 (4) If a member of the joint family carries on his personal
business, the income from business shall be assessed as the
income of individual even if the capital employed in the
business has been obtained by taking a loan from the funds of
the family.

13.  5) Income of the members of the family from a
partnership business carried on by them on personal
account shall be assessed as the income of the firm.
 (6) Income from an impartible estate is assessed in
the hands of the holder of the estate as an individual.
 (7) Under Section 64(2), where an individual converts,
after 31st December, 1969, his separate property into
property belonging to the H.U.F. of which he is a
member, then, the entire income derived from the
converted property of the individual would be
included in the total income of the individual and not
of the family. Also, where such converted property
has been partitioned, the income from such converted
property received by the spouse of the individual will
be includible in the hands of the individual after
partition.

14.  (8) Amount given to the wife of the Karta and unmarried daughters for
marriage expenses at the time of partition of the family cannot be thrown into
hotchpot of H.U.F. and the income earned therefrom is not includible in it.
 Stridhan: It is derived by the woman from her father or brother or husband or
any other relative either before or after her marriage. Income from this
property is not included in the income of the family.
 Impartible Estate  (Property which is not divisible )
 It is that property which cannot be divided among the members of the family.
It consists of land, buildings, securities and other sources of income.
 An impartible estate is owned by the joint family, but the income therefrom
belongs solely and absolutely to the holder of the estate for the time being.
Therefore, the holder of an impartible estate is liable to be taxed on the
income of the estate as an individual and not as the representative of the
Hindu undivided family.
 The holder of an impartible estate is generally the senior-most member of the
family, Ordinarily, as a custom, the junior members of the family also get
maintenance allowance out of the income of an impartible estate. The share of
income which the members of the family received from his estate is not to be
included in their total income.

15.  Under section 10(2), any sum received by an
individual as a member of a Hindu undivided gamily
out of the income of the family or out of the income
of an impartible estate which belongs to the family is
not to be included in his total income. Thus, the
following conditions are to be fulfilled before the
above relief can be granted:
 (1) the existence of a Hindu Undivided Family,
 (2) the assessee should be a member of the Hindu
undivided family,
 (3) the sum has been received by him as a member of
the family, and
 (4) the sum has been paid out of the income of the
family

16.  A Hindu undivided family is a distinct separate assessee.
 The assessment is done in the name of the family just like an
individual, but the rules governing the residence of the
family are different from those of an individual.
 A Hindu undivided family is assessed through its manager.
The eldest male member of the family becomes the manager.
 Co-partnership is the necessary qualification for the
manager ship or Karta of a joint family.
 The shares of income received by members of the family out
of the family income are not included in their total incomes
in their individual assessment, even if the family has not paid
any tax on its income.
 Although according to the Mitakshara school of Hindu Law a
woman cannot be coparcener, yet under special
circumstances, she can be treated as manager of the family
for income tax purposes.
 If there is no male member in the family who is major or is
competent to contract, the senior most woman member of
the family can be treated as manager of the family.

17.  Salary paid to Members of Family :
 Salary is paid to any member of the family including the
manager, it will be allowed as an admissible deduction
in computing the total income of the family only if that
member has rendered some service or has, in any
manner, contributed to the earning of the family and
the salary is genuine and not excessive.

18.  Remuneration earned by a member of H.U.F. as Director or
Partner
 if the funds of a H.UF. are invested in a company or
partnership firm, any remuneration received by a member of
the H.U.F. as a director in the said company or as a partner in
the said firm may be treated as his personal income or the
income of the H.U.F.
 The test for taking a decision in this respect is whether the
remuneration received by the member is on account of the
personal services of the member or it is merely a mode of
paying to the H.U.F
 A return for its investment in the company or firm. If the
member is made the director of the company or partner in
the firm merely on account of the funds invested by H.U.F. in
the said company or the said firm, any income received by
him from the company or the firm shall be the income of the
H.U.F. If, on the other hand t is essentially a remuneration for
services rendered by him, it will be treated as his persona

19.  80C-investments in PF, LIC,
 80D- Premium paid for medical insurance
 80DD- dependent who is differently abled
 80DDB-medical expense for a specified disease
 80G- Contributions made to relief funds
 80GGA, donations made to charity
 80GGC-contributios made to religious/political party
 801A- infrastructure development of country
 801B – commercial production of natural gas
 801BA- developers of affordable housing projects
 80IC/IE- tax subsidy (HP, Sikkim,Uttaranchal, NE States)
 80JJA. 80JJAA – Where 44AB is applicable
 80TTA- interest income maximum of Rs.10,000

20.  According to the explanation given under section 171, partition means
(a) (i)-a mere division of the income of the property without a physical
division of the property itself shall not be deemed to be a partition; or
 (i) where the property does not admit of a physical division then such
division as the property admits of, means partition; but a mere
severance of status shall not be deemed to be a partition-the aforesaid
explanation continues to explain the term partition' as follows.
 (b) Partial partition means a partition which is partial as regards the
persons constituting the Hindu undivided family or the properties
belonging to the Hindu undivided family or both. When some members
of the family severe their status from the family while some others
don't do so then, such a partial partition is said to be based on the
members and when some properties of the family are partitioned,
while some others remain undivided, then such a partial partition is
said to be based on the property.
 If a member of the family solemnizes his marriage under Special
Marriage Act with a lady who is not a Hindu, he will cease to be a
member of the H.U.F. but his share in the property of the family will be
given to him. This severance of a member will not amount to a partial
partition since this is a partition effected by other law and not by
members themselves.

21.  (a) Hindu Undivided Family shall continue to be assessed as
an undivided family so long as the partition of the family is
not accepted by the Assessing Officer.
 (b) If at the time of making an assessment, it is claimed by
or on behalf of the members of a Hindu family assessed as
undivided that a partition has taken place among the
members of such family, the Assessing Officer shall make an
inquiry after giving notice of the inquiry to all the members
of the family.
 On the completion of the inquiry, the Assessing Officer shall
record his conclusion as to whether there has been a total or
partial partition of the joint family property and if there has
been such a partition, the date on which it has taken place.
 Where a partial partition has been effected after 31st
December, 1978, no inquiry shall be made regarding such
partial partition and no conclusion will be recorded regarding
it. In fact the family will continue to be liable to be assessed
as a H.U.F. as if no partial partition had taken place

22.  (c) If as per the inquiry of the Assessing Officer it is found
that the partition took place during the previous year, the
total income of the joint family in respect of the period up to
the date of partition shall be assessed as if no partition had
taken place and such members of the family shall be jointly
and severally liable for the tax on income assessed and any
penalty, interest, fine or other sum in respect of any period
up to the date of the partition.
 After partition the income shall not be deemed to be the
income of the family, but it will be apportioned among the
coparceners in proportion to their shares and every
coparcener shall be taxed on his share of income in his
individual assessment.
 If the recipient member forms a smaller H.U.F. with his wife
and sons, income from such property shall be assessable as
the income of smaller H.U.F and not of the individual.

23.  Taxable Income Tax Rate
 Up to Rs. 2,50,000 Nil
 Rs. 2,50,000 to Rs 5,00,000 5%
 Rs. 5,00,000 to Rs. 10,00,000 20% + 12500
 Above Rs. 10,00,000 30% + 112500
 Surcharge:
 Total income exceeds INR 50 lakh up to INR 1 crore. – 10%
Total income exceeds INR 1 crore up to INR 2 crore. - 15%
 Total income exceeds Rs 2 crore upto Rs 5 crore - 25%
 Total income exceeds Rs 5 crore. - - 37%
 Health and Education Cess: 4% of Income Tax plus Surcharge.
 Note: 1. Marginal relief when income goes beyond 50 Lakhs
 2. Relief of 12,500 applicable only to individuals.

24.  State whether following are to be treated as H.U.F.
under the Income Tax Act, assuming that in each
case there is ancestral property:
 1. Widow mother and two adult sons
 2. Two widows of the two deceased brothers.
 3. Husband and wife having no child.
 4. Four brothers of the ages of 25 years, 22 years, 16
years and 12 years.
 5. One male member and a widow of his deceased
brother.
 6. Uncle and nephew.
 7. Mother, son and son's wife.
 8. Brother, unmarried sister and widowed mother.
 9. Husband, wife and unmarried daughter.
 10. A widowed mother – NOT Treated as HUF

25. The following details have been supplied by the Karta of a Hindu
undivided required family. You are to compute the Gross Total Income
and the Total Income of the family for the Assessment Year 2020-21
(1) Profits from business – Rs. 6,52,000
(2) Salary received by a member of the family from his service
elsewhere Rs. 3,30,000
(3) Director's fees received by the Karta by his personal exertion 76,000
(4) Annual Rental Value of the property let Rs.12,000
(5) Municipal Taxes paid –RS.1,000
(6) Dividends received Rs.500
(7) Long-term capital gains from the transfer of buildings-Rs.30,000
(8) Donations to an approved charitable institution by cheque Rs.70,000
(9) Share of Profit from a firm Rs.80,000

27.  1) QUALIFYING AMOUNT IS THE LEAST OF
 1. ACTUAL AMOUNT=70,000
 2. 1/10 OF GTI –CG =
 1/10X (689700-30000)= 65970
 Deduction = 50% 0f
qualifying amount 65970=
32985