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A. HUF comes into existence on the marriage of the Male family member as per the Hindu Succession Act,1956.
B. For the Income Tax Act, of 1961 HUF came into existence on childbirth (Both male & female) only, as a minimum Two coparceners are required for the formation of HUF.
C. Female members can be coparcener with effect from 09-09-2005 hence any child can bring into existence the HUF as per Income Tax. The wife cannot be a coparcener and can only be a member. Hence HUF cannot survive with only the Wife member remaining and all other Coparcener ceases to exist.
D. For survival of HUF there should be at least one Coparcener and one member.
E. HUF ceases to exist if no coparceners are alive even if one or more members exist and are alive.
F. For PAN purposes HUF date of formation can be either Date of Marriage or the date of Birth of the First child.
G. Karta of HUF can be only a coparcener i.e. female member (Daughter ), Male member, or male lineal descendants. If the coparcener is minor any member can act on his behalf as a manager till he attains majority.
H. Eldest coparcener of HUF becomes Karta on the death of Karta. One can be the karta of any member of HUFs.
I. The Property inherited in-estate by anyone devolves in his/her capacity. It cannot become the corpus of the HUF. if it is treated as corpus it attracts clubbing as a gift to HUF.
J. The Inheritance intestate is governed by the Hindu Succession Act, of 1956.
K. Inheritance by way of testamentary documents ( Gift or Will) will be governed by the Indian Succession Act, of 1925. A Will can be registered or unregistered.
L. Will is revocable several times till the death of the predeceased and last will prevail. Preferably the signature of the doctor & CA is prepared on the Will, the reason doctor can testify the predeceased was of sound mind while signing the will and the CA can testify about the financial particulars.
M. Gift on marriage is excluded u/s 56(2)(x) only if given to an individual. A gift on marriage can be only to individuals and cannot be to HUF as individuals marry not the HUF. Hence gift to HUF in marriage is not covered under exclusion and is taxable if the amount exceeds 50,000/- in aggregate.
N. HUF can get property through Gift. The Gift deed to this effect is compulsory and should be accepted and signed by the donee. Registration of Gift deeds is mandatory as per Indian Registration Act 1908.
O. Any Gift to HUF from members though not taxable in the hands of HUF u/s 56(2)(x), but attracts clubbing provision u/s 64 of IT Act. HUF cannot gift anything to anyone though it can accept gifts.
P. HUF property can be received by Specific Will in favor of HUF, if the Testamentary documents don’t specifically mention HUF name it will be treated as the property of the Individual.
Q. The HUF initial corpus can be formed by way of a gift from a third party (say ₹.2,50,000/-) and paying the taxes u/s 56(2)(x) at appropriate rates treating it as Income from other sources.
R. The HUF property including accumulated profit can only be distributed on full partition. Partial Partition is not allowed under Income Tax Act though allowed under the Hindu Succession Act. It is mandatory to inform and intimate u/s 171 of the act to AO about the full partition of the HUF. As per the law, the AO will pass a speaking order accepting or rejecting the Partition after allowing a hearing from all the stakeholders of HUF.
S. The Distribution of assets on Full partition or Profits can be in any ratio as decided amongst the members. Such distribution should be a testamentary document if not in equal ratio.
T. While partition of HUF, proper distribution amongst all the members including minor interest has to be safeguarded as per the Hindu Succession Act.
U. HUF members can be up to four generations in perpetuity (only male members, who can be coparceners). Female members (Daughters) can be coparceners but her child cannot be either the member or coparcener of the daughter's father HUF. Fifth-generation members cannot demand partition.
V. First generation (Daughter) can be coparcener and can demand partition of HUF and entitle for HUF property.
W. Accumulation of profit adds to corpus hence cannot be distributed without Full partition. The Profits during the year should be distributed and credited to the accounts of the members of HUF and the year of the Income itself so that it doesn’t become the accumulation and property of HUF.
X. To treat any assets as HUF assets, it should be assessed as such.
Y. Member can Give a Loan to HUF or Vice-versa, but such transaction needs to be genuine and cannot be a tool of Tax avoidance.
Z. One can Save a maximum of ₹.2,10,000/- by way of HUF planning.
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